The Bangko Sentral ng Pilipinas is set to
unveil a set of penalties on Metropolitan Bank
and Trust Co. this week, ending a four-month
long probe after a big case of internal fraud
committed by a senior official was uncovered at
the country’s second-largest financial
institution earlier this year.

At the same time, however, Metrobank officials
stressed that the publicly listed bank
controlled by taipan George S.K. Ty had been
taking proactive steps to address weaknesses
that were exposed after one of its vice
presidents, Maria Victoria Lopez, was caught
faking loans to legitimate bank clients but
siphoning off the proceeds to private accounts
under her control.

“We have learned a lot from this incident, and
we’ve been working to tighten internal processes
from day one,” Metrobank president Fabian Dee
told the Inquirer in an interview on Saturday.
“We’ve been working closely with the central
bank to make sure that all their concerns are
addressed.”

On Saturday, Metrobank chair Arthur Ty told the
Inquirer that a rigorous audit process had
resulted in the bank determining conclusively
that the absolute amount stolen from it by the
rogue senior official stood at P1.7 billion—in
the median of the bank’s initial estimate of
P900 million and the original P2.5-billion
figure originally tipped off by whistleblowers
to the Inquirer.

Ty said their internal probe determined that
Lopez was a lone wolf “at least within the bank”
but might have had accomplices externally.

“There’s a good chance we’ll be able to recover
some of the money, including from offshore
accounts” he said.

The Inquirer learned that among the penalties
the central bank would impose on Metrobank were
a slew of policy impositions that would require
the financial giant to tighten internal controls
and audit mechanisms to help prevent a repeat of
the incident—something which Ty and Dee said was
already being done by the bank.

“We have new processes of checks and balances
which we’ve implemented, including conducting
regular balance updates with clients on the loan
side,” Ty said, explaining that the process was
an expansion of Metrobank’s controls that used
to be applied only to depositors.

Dee said, meanwhile, that the bank also audited
all high networth and corporate borrowers that
were formerly handled by Lopez—“over 2,000 of
them”—and determined that 99.4 percent of them
had no issues.

Sources indicated that other BSP penalties on
Metrobank might be administrative sanctions
against ranking officials or members of the
board for failing to detect the systematic fraud
committed by Lopez that insiders said had been
going on for several years before she was
caught.

The central bank launched on Wednesday its
electronic fund transfer (EFT) payments system
which would enable individuals to digitally
transfer funds to any bank in the network within
the same banking day.

The Philippine EFT System and Operations Network
(PESONet), was unveiled by Governor Nestor
Espenilla Jr. at the Bangko Sentral ng Pilipinas
(BSP) headquarters in Manila City.

"[PESONet will be] able to conveniently perform
account-to-account payments and fund transfers,
enable e-commerce, open up markets, and lower
the cost of doing business," he said.

The system serves as the first automated
clearing house of the Philippines under the
National Retail Payment System (NRPS).

Using PESONet, government, businesses, and
individuals can initiate electronic fund
transfers and recurring payments from accounts
maintained in BSP supervised financial
institutions (BSFIs) to corresponding accounts
in other BSFIs.

The funds will be available in the recipient
account within the same banking day, or
immediately upon clearing.

Recipients will be able to get the full amount
of the money transfer, while senders will be
charged a "minimal" fee which will depend on
their corresponding bank.

There are 33 BSFIs that include universal,
commercial, thrift, and rural banks, as well as
non-bank electronic money issuers (NB-EMIs)
signed up as PESONet participants.

Espenilla said the government plans to use
PESONet for payroll accounts, and transactions
with revenue-generating agencies.

This would entail that government collections
and payments systems shift to digital, including
those of the Department of Finance, Bureau of
the Treasury, Bureau of Internal Revenue,
Department of Information and Communications
Technology, Department of Budget and Management,
and the Commission on Audit. — VDS, GMA News

The International Monetary Fund has flagged
potential overheating due to strong credit
growth in the Philippines even as the overall
economic outlook is expected to be favorable in
the medium term.

“Credit growth has accelerated and although most
indicators find no evidence of credit booms so
far, some indicators suggest that credit gaps
could approach early warning levels in 2017 to
2018,” the IMF said in a statement Monday night,
reflecting the results of the conclusion last
Oct. 26 of its executive board’s Article IV
Consultation with the Philippine government.

“Risks to the outlook are tilted to the downside
and stem mainly from external sources. The
combination of high credit growth, buoyant
private investment and fiscal expansion without
tax reform could lead to overheating of the
economy,” the IMF said.

Overheating happens when the economy grows at an
unsustainable rate as productive capacity could
not keep up with robust demand.

“The main systemic risks to financial stability
are high credit growth and concentration. High
credit growth, especially to the real estate and
household sectors, merit continued monitoring.
In addition, some conglomerates and real estate
developers have leveraged significantly, while
shadow-banking activities have expanded. The
conglomerate structure and data gaps generate
challenges to measure concentration but capital
market development could help reduce bank loan
concentration by diversifying the sources of
funding for large conglomerates. [The IMF]
supports the authorities’ efforts to have legal
access to information on conglomerates’
finances,” it said.

“Macroprudential policies should be used to
address systemic risks to financial stability.
In case of a broad-based credit boom, the Bangko
Sentral ng Pilipinas should raise capital
requirements, supported by monetary policy
tightening if accompanied by overheating.
Targeted macroprudential policies should be used
if sectoral credit growth is excessive,” it
added.

For the IMF, the stance of monetary policy
remained appropriate, but the BSP should be
ready to tighten if there would be signs of
overheating.

The Monetary Board, the BSP’s highest
policymaking body, will meet to discuss the
monetary policy stance on Thursday even as
economists expect key interest rates to be kept
steady.

“The authorities’ intention to unwind the high
banks’ reserve requirements over time would
reduce macrofinancial risks. However, this
reform should be carefully calibrated and timed
and should aim to keep domestic liquidity
broadly unchanged,” the IMF said.

BSP Governor Nestor Espenilla Jr. had said that
monetary authorities would soon cut the reserve
requirement, which is one of the highest in the
world.

The reserve requirement ratio currently stands
at a high 20 percent, which means that for every
P1 of deposit and deposit substitute generated
by banks, regulators require that 20 centavos be
set aside as buffer, representing the portion
that banks cannot lend out.

Also, the IMF said the exchange rate should
continue to move freely in line with market
forces, with foreign exchange intervention
limited to smoothing excessive volatility in
both directions.

As a whole, the outlook for the Philippine
economy is favorable despite external headwinds,
the IMF said.

The multilateral lender kept its gross domestic
product (GDP) growth forecasts for the
Philippines of 6.6 percent this year and 6.7
next year owing to continued robust domestic
demand.

“Inflation is expected to stay near the center
of the BSP’s target band due to stable commodity
prices and well-anchored inflation expectations.
The current account balance is projected to
record a small deficit in 2017 because of strong
infrastructure-related import growth. Public
debt is expected to fall further as a percent of
GDP. Risks to the outlook are tilted to the
downside, but the Philippines is well equipped
to respond should risks materialize given its
strong fundamentals and available policy space,”
according to the IMF.

Banks as well as non-bank financial
institutions in three regions affected by the
onslaught of tropical storm “Maring” in
September” can avail of temporary regulatory and
rediscounting relief from the Bangko Sentral ng
Pilipinas (BSP).

In a statement Sunday, the BSP said the relief
measures would cover banks and non-banks with
quasi-banking functions with head offices and/or
branches/extension offices/microfinance-oriented
banking offices in the following areas: cities
of Malabon, Manila, Marikina, Navotas, San Juan,
Taguig and Valenzuela in the National Capital
Region; provinces of Bulacan and Zambales in
Region 3; and Batangas, Cavite, Laguna, Quezon
and Rizal provinces in Region 4.

The specific temporary relief measures for
cooperative banks, rural banks, thrift banks as
well as non-bank financial institutions with
quasi-banking functions, as approved last Sept.
28 by the Monetary Board, the BSP’s highest
policymaking body, included: exclusion of
borrowers’ outstanding loans from the
computation of past due ratios, provided these
were given relief or restructured;
non-imposition of penalties on legal reserves
deficiencies; moratorium on monthly payments due
to the BSP in the case of banks with ongoing
rehabilitation programs; booking of allowance
for probable losses on a staggered basis over a
five-year period for all types of credits
extended to individuals as well as businesses
directly affected by the typhoon, subject to BSP
approval; as well as non-imposition of monetary
penalties for delays in the submission of
supervisory reports. All types of banks,
meanwhile, will be allowed to “provide financial
assistance to their officers and employees who
were affected by the calamity even if the
purpose of such assistance is not identified as
eligible for credit accommodation under their
existing BSP-approved Fringe Benefit Program,”
the BSP said.

As for rediscounting banks, they will be
entitled to a 60-day grace period to settle with
the BSP their outstanding rediscounting
obligations as of Sept. 12.

Trend Micro:
PHL banks need to ensure right security
parameters of third party service providers
Published October 12, 2017 2:17pm
By TED CORDERO, GMA News

Philippine banks need to ensure that
third-party service providers observe the right
security parameters as the industry is among the
high-risk targets of cyber attacks,
cybersecurity service provider Trend Micro Inc.
said on Thursday.

"The biggest concern is also making sure that
all that is part of their ecosystem also have
the level of security parameters equivalent to
your organization," Myla Pilao, director of
Trendlabs research at Trend Micro, told
reporters in a press briefing in Makati City.

"Banks should make sure that the third
party—other parties that are part of their
ecosystem—has the right security parameters,"
Pilao noted.

Local lenders have taken steps to improve
cybersecurity compliance, Pilao noted.

"The good news is, there are two things that
banks have done in the last six months. One is
they forced all of us to change our cards to the
EMV," she said.

The EMV system is more secure against fraudsters
than the magnetic stripe technology used in
credit and ATM cards.

The Bangko Sentral ng Pilipinas earlier said
that banks must completely shift to the EMV
system or face sanctions.

"Second one is banks are also adhering to data
privacy. Banks are taking measures on those
important elements, the kind of data that is
used by the banks," Pilao noted.

Local banks implemented improvements in
cybersecurity, "but it can be better as banks
can always be the favorite of cyber attacks,"
she added. — VDS, GMA News

BSP Reminds
the Public Not to Mutilate Philippine Banknotes
10.06.2017

A video of the burning of what appears to
be Philippine banknotes has come to the
attention of the Bangko Sentral ng Pilipinas
(BSP). The BSP is currently investigating this
incident for appropriate action.

The BSP reminds the public that it is unlawful
to willfully deface, mutilate, tear, burn or
destroy, in any manner whatsoever, currency
notes and coins issued by the BSP, pursuant to
Presidential Decree No. 247. Any person who
shall violate this Decree shall be fined in the
amount of not more than P20,000 and/or
imprisoned for a period of not more than five
years. Moreover, no person or entity, may put
into circulation notes, coins or any other
object or document, which in the opinion of the
Monetary Board of the BSP might circulate as
currency, as stipulated under Section 50 of the
New Central Bank Act. Likewise, it is prohibited
to reproduce or imitate the facsimiles of Bangko
Sentral notes without prior authority from the
BSP. The BSP is authorized to investigate, make
arrests, conduct searches and seizures in
accordance with law, for the purpose of
maintaining the integrity of the currency.

We wish to highlight that the general public
should take pride in our Philippine banknotes
that honor Filipinos who played significant
roles at various moments of our nation’s history
as well as depict the country’s world heritage
sites and iconic natural wonders. The Philippine
banknotes remain a constant reminder of our
ancestors’ patriotism and bravery, as well as
centuries of journey for a better future for our
countrymen.

The Bangko Sentral enjoins the cooperation of
the public in our commitment in maintaining the
integrity of the Philippine currency. Any act of
desecration of our Philippine currency by
mutilating, defacing or burning, should be
reported to the nearest police/law enforcement
agencies, for appropriate action or to the
Currency Issue and Integrity Office, BSP, at
Telephone Numbers: 988-4833 and 926-5092.

The Bangko Sentral ng Pilipinas has
shuttered Cabanatuan City Rural Bank Inc. for
insolvency, the seventh lender shut down so far
this year.

In a bulletin, the state-run Philippine Deposit
Insurance Corp. (PDIC) said the Monetary Board,
the BSP’s highest policymaking body on Sept. 28
prohibited Cabanatuan City Rural Bank from doing
business.

The PDIC was designated as receiver to takeover
and liquidate the rural bank based in Barangay
Padre Burgos (Poblacion), Cabanatuan City, which
had six branches in San Jose City as well as the
towns of Bongabon, Rizal, San Antonio, Talavera
and Zaragoza in Nueva Ecija province.

“The PDIC took over the bank and all its
branches, assets, records and affairs on Sept.
29,” it said.

“Under Section 13 of Republic Act No. 3591 (PDIC
Charter), as amended by RA 10846, a bank that
has been placed under liquidation shall in no
case be re-opened and permitted to resume
banking business. Furthermore, Section 12
thereof expressly provides that banks closed by
the Monetary Board shall no longer be
rehabilitated,” it added.

“Moreover, all assets of the Bank are deemed to
be in custodia legis in the hands of the
receiver and may not be subject to attachment,
garnishment, execution, levy or any other court
processes,” the PDIC said.

A draft for an Executive Order (EO)
creating a remittance bank that will
specifically cater to overseas Filipinos have
been submitted for President Rodrigo Duterte’s
review, according to the Finance department.

“We were able to submit the draft EO in first
week of September. We are ahead of schedule as
we were expecting it to be submitted sometime in
October,” Finance Secretary Carlos Dominguez 3rd
said in an interview.

He explained that an EO will be needed to
execute the Land Bank of the Philippines’
acquisition of the Philippine Postal Savings
Bank (PostalBank) and rebrand it as the Overseas
Filipinos Bank.

“We need an Executive Order to execute the
transfer of the bank from its current
shareholders to the LandBank,” Dominguez said.

“We are also proposing that the name be changed
to Overseas Filipinos Bank from OFW Bank so that
it is more inclusive and not only focused on
workers,” he added.

The Finance chief said that besides the
remittance program, the bank would also offer
loan programs for Filipinos abroad who are
returning and would like to start businesses,
build their homes or educate their beneficiaries
here.

Earlier, LandBank President Alex Buenaventura
said the lender’s board had approved a a
zero-value purchase of PostalBank.

In June, Dominguez said PostalBank had a
negative value of P580 million.

The Overseas Filipinos Bank will have marketing
officers located at consular offices abroad to
service banking requirements of overseas
Filipinos.

Simultaneously, the bank, which will require a
billion-peso capitalization, will also have to
get approval from the central bank’s Monetary
Board.

A pilot test would be conducted in Dubai in
January, to be followed by Bahrain, most likely
by April next year.

Have we
become complicit?
By: Asuncion David Maramba -
@inquirerdotnet05:05 AM September 06, 2017

I ended a recent contributed commentary
thus: “I look to the sociologist-anthropologists
the most, because they […] study us as a people,
what/how we were, are, and what we are
becoming.” I wanted to know “Why do Duterte’s
ratings stay high?” (Opinion, 7/15/17) despite
the killings, killer-words, a climate of fear, a
dismaying frequency of promoting, reinstating,
appointing, awarding, rewarding, threatening,
pardoning, jailing, on political whim and naked
power.

Keen observers of humanity, both Melba Padilla
Maggay in “When ‘evil comes up like a flower’”
(Opinion, 8/26/17) and Randy David in “Questions
for an ‘eyewitness generation’” (Opinion,
8/20/17) didn’t disappoint. They went deeper,
where all I could surmise was “something has
happened to the Filipino character.” They
explained one way by which a people can be led
to accept, then approve, then applaud patently
evil acts, cruel and gross language topped
solely and repeatedly by its author.

The process is at once subtle, seductive,
sinister; “subtle” because we don’t even know
it’s happening, “seductive” because it is
clothed in the “wicked charm” of evil,
“sinister” because it is planned and
accomplished in the shadows.

The typical strongman catalyzes the process
(David).

The goal and multiple reports, in this case of
extrajudicial killings, is repeated like a
mantra, “routinizing … the rhetoric” (Maggay).

Then the EJK is fused to “a compelling reason …
a cause (the eradication of illegal drugs) that
touches the core of our beliefs and aspirations”
(Maggay)

Then the blurring begins. The faces of evil and
of good meld as one, and who’s to say which is
which?

Unconsciously, the voice of conscience becomes
faint. Moral convictions are neutralized and
diluted. First, the numbing, like anesthesia,
then legitimization, then normalization, now
circulating as the “new normal.”

Evil now actually looks good. We don’t even
realize what hit us. How many times have we
heard, “Mabuti nga; patayin na yung mga drug
addicts(It’s good that drug addicts are
killed).”

David asks: “At what point did we lose our will
to defend ourselves…? When did we begin to
rationalize violence…?” Who knows when exactly?
Maggay’s classic title perfectly captures this
insidious descent of evil, morphed into an
accepted and applauded good.

Haven’t we seen something like this happen
before? Ferdinand Marcos activated corruption to
unequaled heights, from him, down to the
lowliest bureaucrat. We can ill afford to
institutionalize another evil habit. We were
brought up to believe that we are children of
love and light; it is saddening to be reminded
that there lurks a dark, vulnerable corner in
our beings.

Has the majority consisting of your friend or
family and mine, of common man as well as
educated elite, backing the fount and source of
this kill-command, become complicit?

Have we, the silent, consenting majority, too
indifferent to what’s happening around us as
long as “it isn’t me,” too timid to expose our
signature on a statement of protest or to join a
movement, too ensconced in the safe cocoon of
pietism and parochial work or a gratifying
charity, those with interests and connections to
protect, too busy to “share” or “send” the flow
of critical commentary from the internet, or
just too comfortable to care—have we all become
complicit?

If so, heed Supreme Court Associate Justice
Marvic Leonen: “We are complicit when we are not
critical. We are part of the conspiracy of the
powerful if we remain silent…. Slowly we are
losing our collective power as sovereign
(Commencement Address, Ateneo School of
Government, 8/20/16). And Ramon Farolan:
“Silence not an option” (Opinion, 8/28/17). And
a Facebook post by Katrina Lagman that the
thousands murdered, foreign allies insulted,
women and LGBT denigrated, islands as good as
ceded to China, a hero’s burial for Marcos,
martial law in Mindanao—“that’s on YOU.”

Preliminary data show that domestic
liquidity (M3) grew by 13.5 percent year-on-year
to about ₱10.0 trillion in July 2017, marginally
higher than the 13.3-percent (revised) expansion
in the previous month. On a month-on-month
seasonally-adjusted basis, M3 increased by 1.4
percent.

Demand for credit remained the principal driver
of money supply growth. Domestic claims grew by
15.7 percent in July, faster than the
15.4-percent increase in June due largely to
sustained growth in credit to the private
sector. Growth in bank loans has remained strong
on account of lending to key production sectors
such as real estate activities; electricity,
gas, steam and airconditioning supply;
manufacturing; wholesale and retail trade,
repair of motor vehicles and motorcycles; and
information and communication. Meanwhile, net
claims on the central government grew by 13.0
percent during the month as a result of
increased borrowings by the National Government.

Net foreign assets (NFA) in peso terms grew by
2.7 percent year-on-year in July, broadly steady
from 2.8 percent in the previous month. Foreign
exchange inflows coming mainly from overseas
Filipinos’ remittances, business process
outsourcing receipts, and foreign portfolio
investments continued to be the drivers behind
the increase in the BSP’s NFA position.
Meanwhile, the NFA of banks expanded due to the
growth in banks’ foreign assets resulting from
higher loans, and investments in subsidiaries
and marketable debt securities.

The growth in M3 remains in line with the BSP’s
prevailing outlook for inflation and economic
activity. Going forward, the BSP will continue
to closely monitor monetary conditions in order
to ensure that domestic liquidity stays adequate
to support the BSP’s price and financial
stability objectives.

Program on
bank mergers, acquisitions to be extended
By Lawrence Agcaoili (The Philippine Star) |
Updated August 27, 2017 - 12:00am

MANILA, Philippines - The Bangko Sentral ng
Pilipinas (BSP) is set to extend anew the
validity of a program that encourages mergers
and consolidations of rural banks to further
strengthen the country’s banking industry.

On the sidelines of the economic forum organized
by the Economic Journalists Association of the
Philippines (EJAP), BSP Governor Nestor
Espenilla Jr. said they are now talking with
state-run Philippine Deposit Insurance Corp.
(PDIC), Land Bank of the Philippines and the
Countryside Financial Institutions Enhancement
Program (CFIEP) for the extension of the
Consolidation Program for Rural Banks (CPRB).

“Most likely we will extend it. The decision for
the extension will not only come from BSP so we
will have to work with PDIC and Landbank,” he
said.

The program was launched in August 2015 to
encourage consolidations and mergers among rural
banks to bring about a less fragmented banking
system by enabling rural banks to improve their
financial strength, enhance their viability,
strengthen management and governance as well as
generate synergies and economies of scale
through common infrastructure, systems and
resources.

It is valid for two years and it expired last
Friday.

“I will be surprised if we will not extend it
because it is working very well,” Espenilla
said.

According to Espenilla, there is a very good
chance that the pending applications of three
groups under the CPRB would materialize within
the year.

The BSP and PDIC earlier relaxed the guidelines
of the CPRB to accommodate applicants.

“Consistent with the objectives to encourage
mergers and consolidations of rural banks, the
CPRB Implementing Guidelines was amended to
allow groups composed of less than five
proponent banks to avail of the program’s
incentives,” Tan stated in the notice.

Originally, the CPRB welcomed any group of at
least five rural banks whose head offices or
majority of the branches are located in the same
region or area.

However, the number was lowered to a group
composed of less than five proponent banks as
long as the surviving bank should have a
risk-based capital adequacy ratio of at least 12
percent and a combined unimpaired capital of at
least P100 million.

The BSP has so far ordered the closure of six
problematic banks this year. It shut down 22
banks last year as it continued to weed out weak
players in the industry.

Banks ordered closed by the BSP’s Monetary Board
and placed under the supervision of the PDIC
include the Countryside Cooperative Rural Bank
of Batangas, Rural Bank of Barotac Viejo
(Iloilo), Rural Bank of GOA (Camarines Sur),
Rural Bank of Ragay (Camarines Sur), Rural Bank
of Iligan City, and World Partners Bank Inc.

The Bangko Sentral ng Pilipinas (BSP) is
urging banks and other financial institutions to
develop by capitalizing on digital technology,
specifically in microfinance.

“Digital technology enables efficiencies and
scale in financial service delivery.
Technology—once only available to the wealthy is
now within reach,” Bangko Sentral Governor
Nestor Espenilla Jr. said during 15th Citi
Microentrepreneurship Awards launch in Manila
over the weekend.

“The sooner we realize this, the sooner we can
adopt digital technology as strategy enabler.
Our inability or refusal to use technology can
undermine our efforts to deepen the impact of
microfinance and drive financial inclusion,” he
said.

The central bank recognizes the power of digital
technology and has adopted policy packages
geared to expand the digital finance ecosystem.

These policy packages include the National
Retail Payments System, the use of cash agents,
and the risk-based know-your-customer procedure.

“In the BSP’s digital finance policy package,
banks and other financial service providers now
have a better platform to expand their reach and
deliver better and cheaper product to their
clients in digital solutions,” he said.

Another opportunity in the operating landscape
is the government’s focus on rural and micro,
small and medium enterprises development.

“This matters as investments in crucial
infrastructure like roads and irrigation systems
support agriculture and local businesses.
Investments in these sectors improve the
productivity and risk profile of your target
market: rural workers and micro-entrepreneurs,”
he said.

These market-enabling interventions makes rural
financing a fertile ground for service providers
looking to expand their client base, Espenilla
noted.

“I believe there are three crucial things
institutions need to develop in taking advantage
of these opportunities in the operating
environment,” he said.

More organizations must use digital innovations
strategically not just in their information
technology infrastructure but also in their
strategy, culture and human resource skills, he
said.

“Yes, this will necessarily involve financial
investment commitment but the gains will be
worth it and there are cause-effect in
approaches that can be explored such as
outsourcing and cloud-based services,” he said.

Espenilla said good governance is needed as the
viability and sustainability of institutions
will be determined ultimately by the quality of
corporate governance.

“This is important not just a matter of
regulatory compliance but because good
governance is a strategic asset that will drive
value to your business and to your clients,” he
said.

“We serve clients better when we give them
products that will meet their needs, improve
their financial resilience and reduce
vulnerability. To do this, we must first
understand their motivations, their values and
other factors that drive their behavior,”
Espenilla added.

MANILA, Philippines – Ayala-led Bank of the
Philippine Islands (BPI) launched a microfinance
bank to target an emerging and underserved
sector of the market in the name of financial
inclusion.

The new microfinance bank, called BPI Direct
BanKo, was born out of the merger of BPI Direct
and BPI Globe BanKo and is aimed at serving
small business loans to self-employed
micro-entrepreneurs (SEMEs).

"This is a relatively new business venture for
us and we intend to build this out quickly. By
the end of this month we will have 40 branches
and offices, by the end of this year we target
100 branches and offices," said BPI president
Cezar Consing at BPI Direct BanKo's media launch
on Tuesday, July 25.

The microfinance bank recently opened 15 new
branches spread throughout Bicol, Negros
Oriental, Davao, and Central Luzon, bringing its
current total to 24.

"The country's prosperity will only be
meaningful if a wider swath of the population is
touched by development and progress. BanKo is
precisely positioned to do just that," Consing
said.

BPI Direct BanKo chairperson Natividad Alejo
also noted that "there are currently 2.5 million
households operating in that segment of the
market and the need to provide focus and
financial services is very evident since only
around 31% of Filipinos have bank accounts and
24.5% actually never save," based on data from
the Bangko Sentral ng Pilipinas (BSP).

"The segment in particular encompasses the
higher end of the C space and the lower end of
the B space. The small businessmen and women who
own at least one business employing less than 10
people," she added.

BanKo will provide low-cost banking services and
loans to this market, whose borrowing needs,
Alejo pointed out, "are usually too big for the
microfinance institutions and rural banks but
too small for commercial banks."

The new microfinance bank's primary product, the
NegosyoKo loan, is intended to provide capital
for SEMEs to expand their businesses. The loan
ranges from P25,000 to P300,000, and is designed
to be processed within a target average of 3 to
5 days.

BPI Direct BanKo also features financial
advisers who act as loan officers to engage
entrepreneurs and help them choose the
appropriate financial solutions to expand their
businesses.

While microfinance loans account for only a
small portion of BPI's total loan portfolio at
present, Consing said the segment is crucial to
the bank's future.

"The current BSP governor, Governor Nestor
Espenilla Jr, owned the financial inclusion
initiatives when he was deputy governor of the
central bank. [Financial inclusion] is important
to the current leadership of the BSP and it is
obviously very important to us because this is
where the economy is going," said the BPI
president. – Rappler.com

Merger of
Marayo Bank, Rural Bank of Oton set
Wednesday, July 19, 2017

THE Bangko Sentral ng Pilipinas (BSP) has
approved the merger of Marayo Bank Inc. and
Rural Bank of Oton, Iloilo. This was confirmed
by Marayo Bank Inc. chairman Franklin
Puentevella. The approval was contained in BSP
Resolution No. 1103 dated June 29, 2017.

The Rural Bank of Oton (Iloilo) Inc. will now
become the Oton Branch of Marayo Bank Inc.

The merger is in line with the long-term
strategic plan of Marayo Bank to expand its
operations to new areas so that it can provide
its proven services, of fast and efficient
service, to as many people as possible.

With this merger, the new Oton Branch of Marayo
Bank can now offer expanded services such as
savings, time and demand deposit, and grant
immediate bigger loans and more diversified loan
products such as real estate loan, chattel
mortgage loan, crop loan, commercial loan,
pension loan, salary loan, allotment loan and
DepEd loan to clients in Oton, Iloilo City and
the neighboring municipalities such as Tigbauan,
Guimbal and San Miguel.

Marayo Bank will continue to expand its banking
services by either putting up new branches or by
acquiring other banks. During the last five
years, Marayo Bank has experienced rapid growth
in terms of loans production and profitability.
As of the end of June 30, 2017, its capital
adequacy ratio is 24 percent, well above the
minimum requirement of 10 percent set by the
BSP.

Marayo Bank now has four main branches located
in Pontevedra and E.B. Magalona in Negros
Occidental, Oton and Banate in Iloilo, and five
extension offices situated in Kabankalan City,
Binalbagan, Bacolod City, Cadiz City and Passi
City.

It has been a year since President Duterte
assumed office. During his campaign he promised
to deliver social justice to the millions of
poor coconut farmers in the country. Back in
March 2016, then Mayor Duterte, with his running
mate Sen. Alan Peter Cayetano, signed a
commitment to coconut farmers in Quezon
province, assuring them of benefits from the
recovered coconut levy. The two candidates were
referring to some of the cases involving the
recovery of the coconut levy filed by the
Philippine government against Danding Cojuangco
and cohorts that were decided with finality
after almost 30 years in court.

Since October 2012 the government has been in
possession of some P69.5 billion in cash coming
from the redemption of preferred shares in San
Miguel Corp. — a block of shares funded by the
levy way back in 1983. This amount has feebly
grown to
P75 billion at present, as more than 80 percent
of the fund earns no interest at all. Worse, not
a single centavo may be used until such time
that a law governing the utilization of the fund
is in place.

The issue of the coconut levy recovery and
utilization has been repeatedly addressed by
administrations from past to present since the
fall of the Marcos dictatorship. All failed in
their promises due to prolonged court litigation
— or so they say. But in the main, it was really
the lack of political will of leaders or their
closeness and subservience to Cojuangco and
associates that prevented the sequestered or
recovered coconut levy from benefiting the
coconut farmers who so badly deserve and need
it.

For decades the coconut farming sector has
persevered despite continuing frustrations and
dampened expectations from politicians. The
Kilos Magniniyog march from Davao City to
Malacañang finally pushed the courts to issue an
entry of judgment on the case of the SMC shares
in December 2014, more than two years after the
final decision; pushed the Aquino administration
to issue an executive order after keeping mum on
the topic; and pushed the House of
Representatives to pass the bill creating a
Coconut Farmers and Industry Trust Fund on third
reading during the 16th Congress.

But politics continues to stand inthe way, as it
has for decades. Despite promises, the Senate
miserably dropped the counterpart bill at its
end the last time around. Today the 17th
Congress is again abuzz with the same bill at
hand. But where it is really headed is so
uncertain, as not much has changed in the
legislature.

Coconut farmers continue their battle for social
justice. But they need a worthy champion in the
government who can change the odds for the
better. President Duterte will have to “force
the issue in Congress” if his commitment still
stands.

THE Department of Finance (DOF) called
Thursday on banks located in Marawi City to
resume normal operations despite continuing
battle between government forces and Islamist
fighters in the strife-torn city.

In a chance interview, Finance Secretary Carlos
Dominguez III said all banks are closed due to
the armed conflict in Marawi City, causing
inconvenience to affected individuals. He
lamented that residents of Marawi have to go to
nearby areas to avail themselves of bank
services. "First of all, we will encourage the
banks to open there because there are no banks
open there. Can you imagine? You are a Marawi
resident and you have to go to Iligan to encash
a cheque or what. It's really very
inconvenient," Dominguez said. "So we want to
make sure the banks are open so the
micro-financing programs can go ahead. So we
really encourage the microfinance, we will
encourage for rebuilding. That’s the most
important," he added. On May 23,

President Rodrigo Duterte issued Proclamation
216 declaring state of martial law and
suspension of the privilege of writ of habeas
corpus in the entire Mindanao, following the
attacks of Islamic State-linked terrorists in
Marawi City. The security troops have beefed up
operations to retake Marawi City from the hands
of the armed men who sought creation of
caliphate in Marawi City, a home to 200,000
people majority of whom are Muslims. The 60-day
implementation of martial rule in the
beleaguered region is expected to end on July
22, as provided by the 1987 Constitution. Amid
the military enforcement in Mindanao, it is
business as usual for member banks in the south.
The Bankers Association of the Philippines (BAP)
has committed that it will continue banking
operations in Mindanao, even after the President
imposed martial law. The BAP has said it would
bring regular banking services even in the areas
of conflict “to serve clients and the general
public.” (SunStar Philippines)

The Philippine government will pitch for
Japanese assistance in terms of project
development and financing nine projects,
including two big-ticket railways, worth at
least P315 billion, economic managers said
Friday.

In a press briefing after the second
Philippine-Japan high-level joint committee and
infrastructure development and economic
cooperation meeting, Finance Secretary Carlos G.
Dominguez III said the meeting was “a testament
to the rejuvenated relations between Manila and
Tokyo under the governments of President
[Rodrigo] Duterte and Prime Minister [Shinzo]
Abe.”

Dominguez and Socioeconomic Planning Secretary
Ernesto M. Pernia led the Philippine side while
Dr. Hiroto Izumi, special advisor to Abe, headed
the Japanese side.

Pernia, who heads the state planning agency
National Economic and Development Authority,
disclosed that nine projects will be pitched for
loans from the Japan International Cooperation
Agency (Jica), including the P214-billion first
phase of the Mega Manila Subway Project, and the
P95.4-billion Malolos-Clark Railway Project.

Also in the pipeline of projects up for Japanese
support were the P9.89-billion Cavite Industrial
Area Flood Management Project, P4.01-billion
Dalton Pass East Alignment Alternative Road
Project, as well as the P2.05-billion Harnessing
Agribusiness Opportunities through Robust and
Vibrant Entrepreneurship Supportive of Peaceful
Transformation (Harvest) project in the
Autonomous Region in Muslim Mindanao, Pernia
said.

The four other projects whose respective costs
were yet to be firmed up were the second phase
of the Malitubog-Maridagao Irrigation Project,
Road Network Development Project in
Conflict-Affected Areas in Mindanao,
Circumferential Road 3 Missing Link Project, and
the fourth phase of the Pasig River-Marikina
Channel Improvement Project, Pernia added.

Dominguez said these projects will hopefully be
supported by the Japanese government starting
with feasibility study preparations upon project
approval and later on also in financing them.

The Finance chief said these projects can be
jointly financed by multilateral lenders such as
the Manila-based Asian Development Bank and the
Washington-based World Bank with Japanese
government agencies such as the Jica and the
Japan Bank for International Cooperation.

“Financing will be a hybrid of Japanese sources
and multilateral sources. In general, that is
the financing plan for all our projects—cheap
ODA [official development assistance] mixed with
those sourced from the World Bank and the ADB,”
Dominguez said.

Neda Undersecretary Rolando G. Tungpalan told
reporters that these nine projects would be
“substantially completed” within the term of
President Duterte.

Dominguez said the Philippine and Japanese sides
“discussed plans and actions to be undertaken in
a mutually agreed schedule that will ensure the
swift implementation of big-ticket projects.”

Besides the nine projects in the pipeline, both
sides have also “looked into possible
Philippine-Japanese cooperation on sectors to be
mutually agreed upon… [including] power/energy,
environment, agriculture, information and
communication technology, and disaster
prevention and preparedness,” Dominguez added.

For Dominguez, the stronger ties between Manila
and Tokyo “vindicate the foreign policy
rebalancing that President Duterte had put in
place at the start of his administration that is
anchored on the Philippines’ greater economic
integration with its neighbors and other Asian
countries.”

The Philippine and Japanese sides will again
meet at a still undetermined date and place to
firm up the projects before these will be up for
approval when Abe returns to Manila in November
to attend the Asean Summit.

“These projects that we will be implementing
with Japanese support will give a tremendous
boost to the Duterte administration’s agenda to
accelerate spending on programs meant to sustain
the Philippines’ growth story and transform this
country into an upper middle-income economy by
the time the President leaves office in 2022,”
Dominguez said. JPV

Exports rose 13.7 percent to $5.489 billion last
May from $4.828 billion a year ago while imports
grew 16.6 percent to $8.242 billion from $7.068
billion in 2016. This resulted in a deficit of
$2.753 billion in May, up from $2.240 billion in
2016.

Socioeconomic Planning Secretary Ernesto Pernia
said the growing trade deficit was largely due
to higher imports of capital goods used for
manufacturing, which should be considered a
positive development as it spurs economic
activity.

“I think in terms of trade deficit, the deficit
is caused by import of capital equipment and
intermediate goods for production. It’s actually
a positive thing when import growth is caused by
capital goods for production. In fact that has
been the trend,” he told reporters.

Higher exports of the following commodities,
meanwhile, were registered in May: cathodes and
sections of cathodes, of refined copper; coconut
oil; other mineral products; ignition wiring set
and other wiring sets used in vehicles,
aircrafts and ships; metal components;
electronic products; machinery and transport
equipment.

Pernia said the deficit trend may “possibly” be
sustained this year as more capital goods are
imported for major construction projects.

The growth in exports, he said, is in line with
the pick up in global demand.

“Our country’s trade growth is consistent with
the global pick up. We are striding forward with
world trade performers and we intend to match
this growth with sound macroeconomic policies,”
he added.

In terms of markets, countries in East Asian
countries remain strong trade partners with 48.3
percent share in export revenue and 46.2 percent
share in imports.

Trade with ASEAN is also strong, with 15.7
percent share in export receipts and 26.1
percent share in inward shipments.

Meanwhile, exports to the European Union
continued its third consecutive month of
double-digit growth at 38.5 percent. ASEAN
likewise remains a promising destination for
exports, with exports to ASEAN economies growing
25.6 percent in May.

The government expects Philippine exports to
increase by about $100 million annually in the
next five years as exports to non-traditional
markets such as Malta, United Arab Emirates and
India are reflected, said Pernia.

Will Duterte
continue the BSP-PDIC bias against small banks?
By Michael Makabenta Alunan -JULY 11, 2017

President Duterte’s thrusts to wipe out
drugs, crime, corruption and poverty are noble
goals, but it’s high time he learns the
machinations of the banking system and the
seemingly systematic staggered closure of small
rural banks by the Bangko Sentral ng Pilipinas
(BSP) and the Philippine Deposit Insurance Corp.
(PDIC), while unfairly bailing out big
commercial banks.

Yearly closure of small banks

From 2000 to June 2017, wwwbanksphilippines.com
reports over 310 small banks, mostly rural
banks, were shut down by the BSP and PDIC.

In 2000 23 small banks were closed by the BSP
and taken over by PDIC; in 2001 19 rural banks,
including four cooperative rural banks; 2002, 12
banks; 2003, nine rural banks, including two
cooperative banks; 2004, two savings and two
rural banks; 2005, 10 banks (eight rural, two
savings); 2006, 11 banks (10 rural and one
development bank); 2007, 17 banks (16 rural and
one savings);

In 2013 18 rural banks, including one big co-op
rural bank in Bulacan with eight branches; 2014,
15 banks (13 rural, one co-op, one savings);
2015, 14 rural banks; 2016, 22 banks (20 rural,
three thrift banks and one savings bank). For
2017, as of June, five rural banks have already
been closed.

But bail out of big banks?

Lopsidedly, while smaller banks are
systematically being closed, bigger banks are
bailed out from liquidity, or maybe from near
insolvency, problems.

One classic example is the P7.6- billion bailout
by PDIC of the Philippine Bank of Communications
(PBCom) sometime in 2002. By 2004 Lucio Co, of
Puregold chain fame, together with Roberto
Ongpin bought PBCom. For Lucio-Ongpin to save
PDIC indirectly from its P7.6-billion
questionable PBCom bailout, PDIC may have
offered sweeteners. Ongpin later bolted out for
whatever reason, but he finished first the
transaction.

If PDIC can extend P7.6 billion to PBCom, why
can’t it bail out rural and cooperative banks,
which extend credit to agriculture that really
create physical wealth, benefiting millions of
farmers?

Awash with funds, but little for the poor

Perhaps, it is time banking reforms are pushed,
starting with a Senate probe on why credit is
not flowing to the countryside, where two-thirds
of those living below the poverty line reside.

Banks are still awash with funds and never had
it so good. Records show the domestic savings
rate in 2015 was 30.3 percent of gross national
income, but gross capital formation rate was
only 19.8 percent. This means surplus savings
are held unproductively with banks, which could
have been invested in rural investments matched
with government guarantees to enable banks to
lend more liberally.

Under the agri-agra loan law, banks are required
to allocate 25 percent of their loan portfolio
for agriculture projects, but the BSP ostensibly
allows them an escape clause by buying T-bills
as a form of paper compliance. Banks obviously
prefer safer paper investments in government
securities over loans to agriculture, which is
vulnerable to the vagaries of nature and other
risks.

But you cannot blame banks in the absence of
solid guarantees for lending to agriculture,
while the BSP also allows them to circumvent but
ironically comply with the agri-agra loan law.
Banks are therefore awash with cash, while
trickles go to rural areas.

Capital siphoning worsens rural poverty?

AS rural banks are increasingly shut down, the
more credit will not flow to the countryside as
the commercial banks replacing them are still
allergic to agricultural lending.

A commercial bank branch manager in Ilocos
revealed many years back that he retained only 2
percent of funds to meet withdrawals and loans,
and remits 98 percent to Manila headquarters.
Ilocos banks may be an exception as Ilocano
overseas migrants continue to send money to
their families, who are fairly frugal for saving
more and shying away from spending or investing
that will boost the local economy.

Moreover, the Comprehensive Agrarian Reform
Program (CARP) has forced most landowners to
abandon agriculture and siphon out their capital
away from agriculture, thus explaining why
agriculture stagnated for many years, making us
more dependent on imports on many agricultural
products.

Neighbors show way to reduce poverty

While we often brag to have the highest growth
rate in the region, we are the worst in reducing
poverty and must learn from our more humble, but
hardworking Asean neighbors.

Thailand pumped credit into agriculture and
reduced rural poverty by 73.2 percent in 12
years, from 51.5 percent in 2001 to 13.9 percent
in 2013; Indonesia’s rural poverty dropped to
13.8 percent in 2014; Vietnam, 17.4 percent in
2010; and Malaysia to 8.4 percent in 2009.

Worst, an Asian Development Bank (ADB) study on
51 developing countries reveals that for every 1
percent increase in income, poverty drops by 1.5
percent or even 2 percent in Asia, except the
Philippines. From 2004 to 2009, for instance,
Philippine GDP grew by 4.9 percent, but poverty
even increased to 26.5 percent in 2009.

In short, we brag of high growth, which is more
financial growth, while the physical economy is
actually collapsing, at least in agriculture,
thus explaining massive rural poverty and
rural-to-urban migration that breeds slums,
criminality, drugs, prostitution, social unrest
and other social issues like insurgency and the
overseas Filipino workers phenomenon. And the
policy bias against small banks may be a major
factor.

The Department of Trade and Industry (DTI)
said that it had already ironed out the
guidelines for the government’s implementation
of Pondo sa Pagbabago at Pag-asenso (P3), a
financing program that is expected to put loan
sharks out of business.

However, the DTI did not give a timetable for
the public release of the guidelines, although
the program was already launched in Leyte,
Occidental Mindoro and Sarangani in January.

P3 is a P1-billion financing program intended to
give micro-, small- and medium-sized enterprises
better access to finance and to reduce their
cost of borrowing, with the government
prioritizing the country’s 30 poorest provinces.

“As funds for the Pondo sa Pagbabago at
Pag-asenso (P3) expected to be released anytime
soon, the Department of Trade and Industry (DTI)
and its microfinancing arm Small Business
Corporation (SB Corp) have ironed out the
guidelines of its implementation that will help
microentrepreneurs throughout the country,” DTI
said in a statement.

If successful, the project is expected to expand
and be able to loan P1 billion for every region
in the country.

DTI said that the fund for the program would
come from the Office of the President and would
be coursed through SB Corp., which would then
accredit partner institutions such as nonbank
MFIs, cooperatives and associations to serve as
conduit for the P3 funds.

DTI said the program would require minimal
documentation requirement, a one-day processing
of application and a low interest at 2.5 percent
a month as the collection for the payment might
be done on a weekly or daily basis.

In the time of the internet, social media,
and digital advertising, Filipinos are better
exposed to information on the latest fashion
trends and the biggest brands worldwide.

Despite the existence of variety in the market,
discounts may be limited for premium brand items
thus the option to refer to seasonal sales.

To address this evident need, AboitizLand is set
to create The Outlets—a shopping destination
that introduces premium brands at reduced price
points all year round.

AboitizLand, one of the country’s biggest
property developers, offers a complete outlet
shopping experience through The Outlets at Lipa,
its first commercial venture in Luzon.

Authentic outlet

The Outlets at Lipa will offer a variety of
retail outlet stores that meet the needs of
discerning shoppers seeking premium items at a
discount and customers awaiting seasonal or
occasion-led sales for a good purchase.

“The Outlets at Lipa is definitely an authentic
outlet shopping destination. We offer a 365-day
shopping experience, providing easy access to
premium brands at discount prices every day of
the year. We are looking at around 200 brands,
at a location that offers a mix between shopping
and dining-there’s retail, there’s food-and some
basic utilities to be housed in the area,”
explained John Amon, vice president and head of
innovation at AboitizLand.

Great retail deals

The Outlets at Lipa offers an authentic
retail-lifestyle experience to the Luzon market.

“At The Outlets at Lipa, we serve not just the
immediate market in the area. We aim to satisfy
customers with more than just a great retail
deal by including a good mix of food options and
exciting outdoor activities,” Amon explained.

“We also have a multi-sports field and beautiful
outdoor spaces for families to enjoy. When
people actually drive to the place, they can
spend an entire day shopping, eating, with the
kids playing football, watching live
concerts-it’s really designed as a destination
worth visiting,” he added.

A 90-minute drive from Manila, the 9.3-hectare
property is found within the Lima Technology
Center in Lipa-Malvar Batangas. The Outlets at
Lipa is set to open during the summer of 2018.

Preliminary data show that domestic
liquidity (M3) grew by 11.3 percent year-on-year
to ₱9.6 trillion in May 2017, sustaining the
11.2-percent expansion in the previous month. On
a month-on-month seasonally-adjusted basis, M3
increased by 1.2 percent.

Demand for credit remains the principal driver
of money supply growth. Domestic claims grew by
14.3 percent in May, faster than the
13.8-percent growth in April due largely to
sustained growth in credit to the private
sector. Growth in bank loans remains strong on
account of lending to key production sectors
such as real estate activities; electricity,
gas, steam and airconditioning supply;
manufacturing; wholesale and retail trade,
repair of motor vehicles and motorcycles; and
information and communication. Meanwhile, net
claims on the central government expanded by 8.9
percent during the month as a result of
increased borrowings by the National Government.

Net foreign assets (NFA) in peso terms grew by
4.6 percent year-on-year in May from 3.6 percent
in the previous month. Foreign exchange inflows
coming mainly from overseas Filipinos’
remittances and business process outsourcing
receipts continued to be the drivers behind the
increase in the BSP’s NFA position. Meanwhile,
the NFA of banks expanded due to the growth in
banks’ foreign assets resulting from higher
loans and investments in marketable debt
securities.

The growth in M3 remains consistent with the
BSP’s prevailing outlook for inflation and
economic activity. Going forward, the BSP will
continue to monitor domestic liquidity closely
to ensure that monetary conditions remain
conducive to maintaining price and financial
stability.

“Under my watch, the BSP will continue to move
towards more market-based execution of monetary
policy… We will continue to pursue capital
market reforms to provide a viable alternative
source of financing for long-term investments,
including the development of the necessary
financial market infrastructures,” Espenilla
said in his speech at a testimonial dinner
hosted by the Bankers Association of the
Philippines.

Espenilla, 58, will assume the top BSP post on
July 3 after incumbent Gov. Amando M. Tetangco,
Jr. ends a 12-year run at the helm of the
central bank.

Espenilla, who is currently deputy governor for
the BSP’s Supervision and Examination Sector,
assured the banking community of sustained
reforms to build on a “legacy of excellence”
under Tetangco’s leadership. The incoming
central bank chief said he will maintain the
interest rate corridor system — which was
adopted in June last year — amid a continuing
review of current monetary tools to ensure an
efficient, “market-oriented” conduct of policy
rate-setting. The central bank migrated to the
corridor scheme last year, with the weekly
auction of term deposits as its main monetary
tool to “reduce the volatilities” in market
rates and where banks may park idle funds for
2.5-3.5% returns. “With respect to
liberalization initiatives, we intend to further
liberalize the provision of financial products
and services, including our existing rules on
foreign exchange transactions, to achieve a more
risk-based, transparent and market-determined
policy framework,” Espenilla said.

The BSP has successively introduced rules making
it easier to transact in foreign currencies. The
list includes a higher limit for
over-the-counter dollar purchases to $500,000
for individuals and $1 million for companies, as
well as raising the amount of cash that
travelers can bring in and out of the country to
P50,000 from P10,000 previously. Dollars
acquired through Philippine lenders may also be
kept as dollar deposits or be used to settle
person-to-person transactions.

The BSP has also allowed thrift, rural, and
cooperative banks to buy and sell foreign
currencies.

Espenilla also batted for the industry’s support
for the National Retail Payments System (NRPS),
as he seeks to migrate transactions to
electronic channels to make fund transactions
more efficient and inclusive especially for
unbanked Filipinos. Launched in 2015, the NRPS
was designed to steer financial transactions
gradually away from cash- and check-based
payments towards electronic fund transfers and
e-wallet disbursements.

Shifting to electronic modes of payment from
cash-based settlement can spur further economic
activity and boost gross domestic product growth
by as much as 2-3%, according to the United
States Agency for International Development.

“Under my watch, the BSP will continue to move
towards more market-based execution of monetary
policy… We will continue to pursue capital
market reforms to provide a viable alternative
source of financing for long-term investments,
including the development of the necessary
financial market infrastructures,” Mr. Espenilla
said in his speech at a testimonial dinner
hosted by the Bankers Association of the
Philippines.

Mr. Espenilla, 58, will assume the top BSP post
on July 3 after incumbent Gov. Amando M.
Tetangco, Jr. ends a 12-year run at the helm of
the central bank.

Mr. Espenilla, who is currently deputy governor
for the BSP’s Supervision and Examination
Sector, assured the banking community of
sustained reforms to build on a “legacy of
excellence” under Mr. Tetangco’s leadership.

The incoming central bank chief said he will
maintain the interest rate corridor system --
which was adopted in June last year -- amid a
continuing review of current monetary tools to
ensure an efficient, “market-oriented” conduct
of policy rate-setting.

The central bank migrated to the corridor scheme
last year, with the weekly auction of term
deposits as its main monetary tool to “reduce
the volatilities” in market rates and where
banks may park idle funds for 2.5-3.5% returns.

“With respect to liberalization initiatives, we
intend to further liberalize the provision of
financial products and services, including our
existing rules on foreign exchange transactions,
to achieve a more risk-based, transparent and
market-determined policy framework,” Mr.
Espenilla said.

The BSP has successively introduced rules making
it easier to transact in foreign currencies. The
list includes a higher limit for
over-the-counter dollar purchases to $500,000
for individuals and $1 million for companies, as
well as raising the amount of cash that
travelers can bring in and out of the country to
P50,000 from P10,000 previously.

Dollars acquired through Philippine lenders may
also be kept as dollar deposits or be used to
settle person-to-person transactions.

The BSP has also allowed thrift, rural, and
cooperative banks to buy and sell foreign
currencies.

Mr. Espenilla also batted for the industry’s
support for the National Retail Payments System
(NRPS), as he seeks to migrate transactions to
electronic channels to make fund transactions
more efficient and inclusive especially for
unbanked Filipinos.

Launched in 2015, the NRPS was designed to steer
financial transactions gradually away from cash-
and check-based payments towards electronic fund
transfers and e-wallet disbursements.

Shifting to electronic modes of payment from
cash-based settlement can spur further economic
activity and boost gross domestic product growth
by as much as 2-3%, according to the United
States Agency for International Development. --
Melissa Luz T. Lopez

MANILA – The Monetary Board, the highest
policy-making body of the Bangko Sentral ng
Pilipinas has terminated the rediscounting
widows of thrift banks (TBs), rural banks (RBs),
and cooperative banks (CBs) after it noted the
lesser need for the facility.

With this, the rediscounting window now has a
unified rate of 3.5625 percent for the 90-day
facility and 3.6250 percent for the 91-day to
180-day facility.

Previously, the rate of the 1-90 days facility
was based on the central bank’s overnight
borrowing or reverse repurchase (RRP) facility,
which is 3 percent; the 91-180 days is based on
the RRP rate plus 0.0625 percent; and the
181-360 days was based on the RRP rate plus
0.1250 percent.

Under the latest MB decision, the 181-360 days
facility was also terminated.

The rediscount facility was established in 2013,
with universal and commercial banks given a
five-year term until 2018; and TBs, RBs and CBs
are given a 10-year period or until November
2023, to help the banks improve their deposit
mobilization capacities and increase the
utilization of other funding sources.

BSP, in a statement, said the Board has noticed
that TBs, RBs and CBs are no longer dependent on
the facility; thus, the decision to shorten the
sunset period extended to them.

“This was validated by the results of a
conducted survey of rediscount banks and through
consultative meetings with banking groups,” it
said.

The central bank on Tuesday reported that
availment on the peso-rediscount facility as of
May 31, 2017 reached P15 million, 98.5 of which
were used for other credits such as housing and
permanent working capital while 1.5 percent was
tapped for production credits.

Availment in the facility in the first five
months this year is lower than the P10.64
billion in the same period in 2016.

MANILA, Philippines - The Bangko Sentral ng
Pilipinas (BSP) is set to implement a unified
rediscounting window for all types of banks as
it decided to terminate the sunset provision for
small banks.

The central bank has approved the removal of the
sunset period of five years for thrift banks and
10 years for rural and cooperative banks in
accessing the BSP’s peso rediscount facilities.

Based on statistical data, the regulator said
thrift, rural and cooperative banks are no
longer dependent on BSP funds, thereby
warranting the shortening of the sunset
provision.

“This was validated by the results of a
conducted survey of rediscounting banks and
through consultative meetings with banking
groups,” the BSP said.

Rediscounting is a privilege of a qualified bank
to obtain loans or advances from the BSP using
the eligible papers of its borrowers as
collaterals. It is a standing credit facility
provided by the central bank to help banks
liquefy their position by refinancing the loans
they extend to their clients.

The BSP introduced major reforms in its peso
rediscounting policies in 2013 in line with its
lender-of-last-resort function. It issued
Circular 806 establishing the Rediscounting
Window II for thrift, rural, and cooperative
banks.

Thrift banks were given a sunset period of five
years or until November 2018 while rural and
cooperative banks were given 10 years or until
November 2023 to access Rediscount Window II at
the then existing terms.The sunset period was
adopted to allow small banks to use the
transition period to improve their deposit
mobilization capacities and increase the
utilization of other funding sources, thus
reducing their dependence on BSP funding over
time.“Following the termination of the sunset
provision, all banks shall access a unified
rediscounting window which shall adopt the terms
under Rediscount Window I,” the BSP said.The
Rediscount Window I available for big or
universal and commercial banks with a rate of
3.5625 percent for loans with a maturity of 90
days and 3.625 percent for 180 days.The BSP also
decided to adjust the rediscount rates to the
overnight lending rate currently pegged at 3.5
percent plus 0.0625 percent for loans maturing
90 days and the overnight lending rate of 3.5
percent plus 0.1250 percent for 180 days.The
regulator also decided to shorten the maximum
loan maturity to 180 days from 360 days.Latest
data showed total availments under the peso
rediscount facility amounted to P15 million in
the first five months. Of the total amount, 97.5
percent of the total credits consisted of
housing, 1.5 percent went to production credits,
and one percent for working capital.

The Foundation for Economic Freedom (FEF)
argues that the fundamental problem of
Philippine agriculture is the “restrictions in
the rural land market” due to the Comprehensive
Agrarian Reform Program’s 10-year prohibition on
selling and mortgaging of CARP lands (Inquirer,
5/19/17). Asserting that these restrictions keep
farmers poor and prevent them from raising their
productivity, the FEF echoes earlier calls for a
“property rights regime” with no agricultural
land ceiling.

We beg to disagree.

First, contrary to FEF claims, Philippine rural
poverty is characterized mainly by lack of
access to land and productive resources. A study
by Focus on the Global South using official data
shows that the top 15 provinces with high
poverty incidences also have the highest land
redistribution backlog, with 13 of these
provinces above the national poverty average of
26.5 percent.

On the other hand, areas with high land
distribution accomplishments showed significant
positive changes in terms of rural poverty and
farm productivity. Studies by the Asia Pacific
Policy Center (APPC) reveal that CARP has
contributed to the “observed changes in rural
welfare in agrarian reform communities (ARC) and
amongst landowning farmers.”

The APPC’s Arsenio Balisacan writes that
“poverty incidence in ARC barangays went down by
16 percentage points between 1990 and 2000, and
figures for 2005 and 2011 show that average
yields in ARCs actually improved relative to
national averages for all crops—palay, coconut,
sugar and corn.” The Annual Poverty Indicators
Survey for 1998, 2004, and 2011 indicate that
CARP households registered an increase in their
average per capita income by 12.3 percent and
reduction in poverty incidence by 21 percent
compared to the general population and
landowning non-CARP households.
Monsod and Piza (2014) report that the average
net profit from agrarian reform beneficiary
(ARB) farms in ARCs was 10 percent higher than
non-ARB farms in ARC, and that a benefit-cost
analysis of the ARC model compared to “the
mainstream agricultural development strategy”
shows a greater net present value (NPV) for the
former. Cielito Habito’s 2008 Report Card on
Asset Reform Programs shows that 81 percent of
ARBs in ARCs reported improvements in the
quality of their lives.

Second, it is disingenuous to call for an
unrestricted land market regime to solve the
Philippines’ agricultural problems. To
paraphrase one of this commentary’s authors,
under the current dysfunctional capitalist
system where noneconomic factors are prominent,
where political and agribusiness rural elites
are predatory, and where rent-seeking
speculation through voracious property
developers rules, it would be highly naive to
dream of such a land regime.

Besides, existing restrictions “have not
prevented private capital from asserting and
invoking the ‘laws’ of the market and
encroaching on land reform areas and harassing
and dislocating legitimate ARBs in particular
and other rural populations in general—all in
the name of productivity, efficiency, and
optimum land utilization.”

More essential, an unrestricted land market with
no ownership ceiling “will simply open wide the
rural floodgates to modern mutant versions of
the unlamented landlord class and reintroduce
the oppressive and exploitative social relations
that necessitated a redistributive land reform
program in the first place. It is precisely this
rapacious property rights regime in the rural
sector that a truly just and meaningful land
reform seeks to prevent, and where it exists, to
overturn.”

Social justice and adequate support services for
small farmers are the essential components of a
productive and ecologically sound agricultural
sector, not large-scale profit-hungry private
capital. More than ever, land redistribution
remains the key to countryside development and
national economic progress.

Eduardo C. Tadem, PhD, is president of the
Freedom from Debt Coalition and professorial
lecturer in Asian studies at the University of
the Philippines Diliman. Mary Ann Manahan is
senior program officer of Focus on the Global
South.

The local banking system reported total
resources of P14.08 trillion as of end-March, up
12.37 percent from the same period in 2016 of
P12.53 trillion, on a continuously increasing
capital and assets-base.

Based on data from the Bangko Sentral ng
Pilipinas (BSP), the universal and commercial
banks which control more than 90 percent of
industry resources, had P12.719 trillion of the
total. This was higher compared to end-March
2016’s P11.254 trillion or up 13 percent
year-on-year.

Thrift banks, in the meantime, reported total
resources of P1.294 trillion at the end of the
first quarter, from the same time last year of
P1.055 trillion.

The central bank’s data on the total resources
of the financial system were gathered from
banks’ submissions of consolidated statement of
condition.

Overall including non-banks, the entire
financial system’s total resources amounted to
P17.302 trillion which was more than 2016’s
P15.670 trillion or a growth of 10.41 percent.

The BSP’s data on the smaller rural banks and
non-banks are not as up-to-date as the big banks
and thrift banks.

The latest data was still end-December 2016,
which was P231.7 billion for rural banks while
the total non-bank resources (investment houses,
finance companies, investment firms, pawnshops
and securities dealers/brokers) stood at P3.222
trillion as of end-2016.

The BSP currently supervises and monitors 42
universal and commercial banks and 64 thrift
banks. There are 479 rural and 29 cooperative
banks also under BSP’s watch.

At the end of 2016, the central bank is
regulating 10 non-bank financial institutions
with quasi-banking functions and 5,557 non-banks
without quasi-banking functions, of which 5,420
are pawnshops.

The BSP and the banking sector has been
preparing operations and networks for the ASEAN
market and financial integration.

The new law which permits foreign banks to
acquire up to 100 percent of the voting stock of
an existing domestic bank, from the previous 60
percent limit, make it easier to establish
corresponding QABs from other countries.

The BSP effectively opened up to 40 percent of
the total banking assets to foreigners.

Credit watchers such as Moody’s and Fitch
Ratings think Philippine banks will benefit
greatly from integration judging by their
positive reviews. Fitch has tagged the local
banking sector as the only industry in the Asia
Pacific that has a positive outlook while
Moody’s said the local sector is the only one in
ASEAN with stable reviews on asset quality,
capital, profitability, funding, liquidity and
operating environment.

The University of Asia and the Pacific
(UA&P) held a symposium last week that featured
the institution’s well-known founders, former
Finance Secretary Jesus Estanislao and chief
economist Bernardo Villegas, to talk about “The
Next 50 Years of Philippine Economy and
Governance.”

The occasion was interesting. Both stalwarts
gave very fascinatingly auspicious and positive
scenarios to a time that neither of them may no
longer be able to actually witness or prove to
happen.

Considerations

Good governance and social responsibility have
proven pivotal roles toward economic advancement
and social betterment. The core values of the
Filipino, according to Estanislao, are consonant
with the key ethical frameworks that help build
positive relationships leading to profitable
activities ascribed in good governance and
social responsibility. These are love of country
and people, patriotism, freedom and
responsibility.

Established key core values to successful good
governance and social responsibility are
patriotism, democracy and accountability.

The steps or fundamental changes to be made to
bring the country closer to greater economic
heights and better financial landscape are: a)
from being looked down upon to being looked up
to; b) get high level of respect from building
weak and inefficient institutions to strong,
capable institutions, and c) from being divided
by selfishness to being united.

In this connection, Estanislao called for the
practice of personal good governance, integrity
and ethics. These are to start in the family and
echoed further in the schools, other entities
and their alliances, fostering solidarity and
teamwork as well.

Next are awareness and proper appreciation of
our resources and the practice of the Bayanihan
spirit. A good grasp on our resources will both
lead to a realistic appreciation in their
utilization and exploitation as well as improve
economic and financial policies with neighbors
in the Association of Southeast Asian Nations
(Asean) region, in East Asia and the world.

Estanislao said he found that the main strategy
to accomplish the goal of economic and social
advancement would be the Bottom-Up approach, in
addition to devising a 10-year program that
should be reviewed every three years.

The ordinary citizens, like you and me, should
take charge because the responsibility of acting
on behalf of society as well as the obligation
to keep a balance between the ecosystem and the
economy are better achieved when voluntarily
accepted rather than when imposed by the
government to the individual.

Villegas, for his part was very optimistic that
the country would hit its economic and social
goals. He said that where the country would go
has been the result of the positive
contributions of the past Presidents—from Marcos
to the present time.

How will
companies survive in digital age? More than
being techie, Ateneo’s Cielito Habito says
customer is kingHow will businesses survive amid cutthroat
competition when surveys show that the lifespan
of big companies has been falling?

Former socioeconomic planning secretary Cielito
Habito believes companies need to learn the
importance of listening to their customers and
being attuned to their needs so they can thrive
in the ever-changing business landscape.

Habito, who teaches economics at the Ateneo de
Manila University, cited Procter and Gamble,
Banco de Oro and CD-R King as some of the
businesses which continue to succeed simply
because they continue to innovate.

In his May 20 column for the Philippine Daily
Inquirer, Habito recalled that P&G succeeded in
India because it developed a razor for men that
did not need to be cleaned by water, and is
cheap enough.

BDO, meanwhile, changed the banking landscape by
offering longer banking hours and being open on
weekends.
CD-R King managed to survive the obsolescence of
CDs– which used to be its main product– by
offering other gadgets and tech items.

With technological innovation and kickstarter
companies constantly threatening the survival of
more established brands, Habito said businesses
must bear in mind that customer is king.

“The days of sweeping the needs of customers
under the rug for profit are numbered. Not only
are there alternatives all over just waiting to
fill the gaps, unaddressed customer needs also
come under close scrutiny,” he said.

State-run Land Bank of the Philippines put
up a P1-billion credit facility for a pilot
project covering the replacement of an initial
650 public utility jeepneys with electric
vehicles costing P1.4 million to P1.6 million
per unit.

Dominguez said the jeepney modernization program
of the government would require public diplomacy
to convince drivers, operators and the riding
public that it was time to replace the old
vehicles with cleaner, healthier, safer and more
fuel-efficient electric cars. He said around
220,000 PUJs across the country needed to be
modernized.

“We will try to replace 220,000 aging and
inefficient jeepneys nationwide with new
vehicles. The replacement vehicles will help
clear the air literally, make commuting safer
for the public and contribute to a more rational
public transport system,” Dominguez said during
the signing ceremony in Davao City.

Dominguez said the government should carry out
the difficult task of convincing PUJ drivers and
operators as well as the riding public that the
“well-loved” Philippine jeepney has become an
“inefficient dinosaur” that “must now be
relegated to the museum.”

He said that in the past, there were several
attempts to modernize the country’s public
transport system, among them a plan by the
Development Bank of the Philippines 10 years ago
to replace passenger buses plying Edsa with new
ones running on liquefied natural gas.

All the other previous efforts although
financially feasible for the bus companies were
met with resistance.

“There will be political resistance, no doubt,
from those who do not wish change. We will have
to conduct effective public diplomacy to raise
the acceptance of this program. We must convince
the jeepney drivers and operators that this is
the way to go. They must understand the
financing package will make the shift
affordable,” Dominguez said.

Dominguez said he was “confident the government
agencies participating in the program have the
political will to see this program through.”

“It will be an important contribution to
fighting climate change. It will help decongest
our exhausted roads. It will make commuting a
more pleasant activity for our bedraggled
commuters,” he said.

Dominguez said the three agencies primarily
involved in the jeep modernization program―the
DoF, DOTr, and LandBank―pooled their talents and
resources to realize the goal of bringing the
country’s public transport system to the 21st
century.

“Everywhere in the world, countries are looking
into new transport modes to keep the air clean,
move people efficiently and decongest the
roads,” Dominguez said.

“In a few short years, electric cars are
expected to outsell conventional vehicles
running on fossil fuel,” he said.

MANILA, Philippines - The Bangko Sentral ng
Pilipinas (BSP) has allowed rural and
cooperative banks to invest in readily
marketable bonds and other debt securities
without prior approval from the regulator.

The amendments, Tetangco said, allows rural and
cooperative banks to acquire readily marketable
funds and other debt instruments without prior
approval from the BSP.

He said the bonds and other debt instruments
should have complied with the new rules on
registration of commercial papers.

Furthermore, the BSP chief added the investment
should not be held for trading purposes.

Rural and cooperative banks should conduct a
continuous self-assessment of their compliance
and should submit one-time notarized
certification that the pre-qualification
requirements under the MORB have been complied
with 10 calendar days from date of initial
investment.

On the other hand, thrift banks could invest in
evidence of indebtedness thatare not registered
with the Securities and Exchange Commission
(SEC) but are not readily marketable
securities.The regulator said the
classification, accounting procedures,
valuation, sale and transfers of investment in
debt securities and marketable equity securities
should be in accordance with the guidelines.

Tetangco said rural banks could also offer other
banking services as well as engage in the buy
and sell of foreign exchange.

Cooperative banks could also perform any or all
of the banking services offered by rural banks.

The regulator warned it would impose penalties
and sanctions on BSP-supervised financial
institutions and concerned officers found
violating provisions of the guidelines.

A fine ranging between P1,000 and P20,000 would
per day be imposed on rural, cooperative,
thrift, commercial, and universal banks reckoned
from the date the violation was committed.

Concerned officers face reprimand on the first
offense while subsequent offenses would merit a
90-day suspension without pay.

Latest data from the BSP showed the number of
banks declined to 602 last year from 632 in 2015
consisting of 42 universal banks, 21 commercial
banks, 60 thrift banks as well as 500 rural and
cooperative banks.

The BSP ordered the closure of 22 problematic
banks last year as part of efforts to weed out
weak players and to pursue the consolidation
among major players.

I have written so much over the years,
including in this column, about our deeply
flawed policies on rice. It has been tiring and
exasperating. I’ve had the chance to advise
several secretaries of agriculture, whether
officially or otherwise, starting with Finance
Secretary Sonny Dominguez, when he held the
agriculture portfolio in the Cory Aquino Cabinet
three decades ago. It seems that most of those
who have occupied that position quickly take to
heart the seemingly widely accepted proposition
that rice is a “political crop” in the
Philippines—and that this gives license for them
to perennially defy sound economics in setting
the country’s policies on the crop.

Today we are seeing it play out again, with
almost exactly the same timeworn script, as if
we simply refuse to learn the lessons from
history and from our neighbors. It is said that
the success of a Philippine secretary of
agriculture (and even president) is measured by
the Filipino public on the basis of whether
he/she can achieve rice self-sufficiency for the
country. The fact is, the more we believe in
that, the more that success in managing our
agriculture, raising farm incomes, and bringing
down high levels of rural poverty and
malnutrition will simply keep eluding us.

These days, the commodity is in the limelight
again, after fellow economists and former
economic policymakers belonging to the
Foundation for Economic Freedom publicly
expressed concern over recent extreme
pronouncements from the President himself,
obviously ill-advised. Their message says what I
and other economists have been saying time and
again about our self-destructive rice policies.
The problem with our restrictive rice policy is
that it makes rice unduly expensive to 103
million rice consumers, supposedly for the sake
of 2.4 million rice farmers. This makes it
antipoor and has led to large numbers of
food-insecure Filipinos and alarming rates of
malnutrition and stunting (33.5 percent!) among
young Filipino children, leading to irreparable
lifelong impairment of brain and physical
development. Yes, most of our estimated 2.4
million rice farmers are poor, and most
certainly deserve help. But we should bear in
mind that with a poverty rate of over 21
percent, there are nearly 10 times as many poor
Filipinos, including rice farmers, who studies
have consistently shown to
be mostly net buyers of rice as well. The
numbers of our poor could be significantly
reduced if only they could buy their food staple
at prices similar to what our Southeast Asian
neighbors do.

There is so much I can say and reiterate, but
let me distill it down to what’s wrong about
what we have been doing in rice. We have for too
long insulated the domestic rice market from the
international market for the commodity by
tightly controlling imports via the National
Food Authority (NFA). But we have a long enough
history with this to know that the government is
a bad judge on when or how much to import, which
only led to highly volatile prices for rice. The
age-old recommendation to remove rice
quantitative restrictions (QRs) via the NFA
monopoly on rice importation does not actually
imply letting rice get in duty-free, but to
change the form of protection to an import
tariff. Done right, we need not see a sudden
domestic price fall with the lifting of rice
QRs. The government has no business being in the
rice business, especially if it’s a losing
proposition that bleeds the national treasury of
billions of pesos we taxpayers all pay for.

There is a much better way. We should have long
ago permitted the private sector to import the
commodity subject to an import tariff that sets
domestic prices to wherever we want it,
balancing the interests of farmers and
consumers. Not only would we stop government
coffers from bleeding due to the NFA’s perennial
losses from its commercial operations (P167
billion at last count); it will actually gain
substantial revenues from the tariff on rice
imports, that can then be used to help our rice
farmers raise productivity, and lower costs. But
first we have to put aside the obsession with
producing all our rice ourselves, until such
time that we can produce it at the same costs
our neighbors do.

The Department of Trade and Industry (DTI)
said that it had already ironed out the
guidelines for the government’s implementation
of Pondo sa Pagbabago at Pag-asenso (P3), a
financing program that is expected to put loan
sharks out of business.

However, the DTI did not give a timetable for
the public release of the guidelines, although
the program was already launched in Leyte,
Occidental Mindoro and Sarangani in January.

P3 is a P1-billion financing program intended to
give micro-, small- and medium-sized enterprises
better access to finance and to reduce their
cost of borrowing, with the government
prioritizing the country’s 30 poorest provinces.

“As funds for the Pondo sa Pagbabago at
Pag-asenso (P3) expected to be released anytime
soon, the Department of Trade and Industry (DTI)
and its microfinancing arm Small Business
Corporation (SB Corp) have ironed out the
guidelines of its implementation that will help
microentrepreneurs throughout the country,” DTI
said in a statement.

If successful, the project is expected to expand
and be able to loan P1 billion for every region
in the country.

DTI said that the fund for the program would
come from the Office of the President and would
be coursed through SB Corp., which would then
accredit partner institutions such as nonbank
MFIs, cooperatives and associations to serve as
conduit for the P3 funds.

DTI said the program would require minimal
documentation requirement, a one-day processing
of application and a low interest at 2.5 percent
a month as the collection for the payment might
be done on a weekly or daily basis.

Economic managers are pushing for rice
importation by the private sector to temper
rising prices of the Filipino staple food.

“The stand of the economic team is timely rice
importation because it’s not possible, at least
in the near- to medium-term, to be [rice]
sufficient,” Socioeconomic Planning Secretary
and Ernesto M. Pernia told reporters on the
sidelines of The Dutertenomics Forum yesterday.

Asked if economic managers preferred private or
government-to-government importation, Pernia,
who heads state planning agency National
Economic and Development Authority, said it
should be the private sector.

“With private sector importation, the government
does not spend. If it’s
government-to-government, it adds to the debt of
the NFA, which is already P211 billion,” added
Pernia, referring to state-run National Food
Authority, the agency mandated to stabilize both
the supply and prices of rice.

Pernia said the economic managers would inform
the President about their position with regards
this issue.

For Finance Secretary Carlos G. Dominguez III,
he said he was concerned about keeping inflation
low.

“As finance secretary I am very interested to
keep the inflation rate down, particularly
inflation on rice because it hits the poor
people harder than the more affluent people,”
explained Dominguez, who heads the Duterte
administration’s economic team.

The interagency NFA Council reportedly met
yesterday but the economic managers said they
have yet to know what transpired during the
meeting.

Pernia earlier told the Inquirer that among the
measures that could mitigate rising prices of
basic goods included “passing the law that can
tarrify rice in lieu of qualitative restriction
(QR)” as well as “reforming the National Food
Authority to allow timely importation to
forestall impending shortages.”

Pernia said Neda was amenable to the proposal of
state-run think tank Philippine Institute for
Development Studies (PIDS) to slap a 35-percent
tariff on rice when the import quota system
expires by the middle of this year.

Besides tarrification, PIDS was also pitching
subsidies to farmers to improve agricultural
productivity.

Banks’ trust and investment management
units have assets amounting to P2.843 trillion
at the end of 2016, up 11.18 percent compared to
the previous year’s P2.557 trillion, data from
the central bank show.

The 41 universal and commercial banks control
most of these assets or P2.803 trillion of
total, of which P1.494 trillion are net
financial assets, P715.6 billion are deposits in
banks and P284.396 billion are cash and due from
banks.

Overall, including thrift banks’ managed assets,
the domestic banking system had total net
financial assets of P1.517 trillion, deposits in
banks of P724.215 billion and cash and due from
banks of P286.985 billion.

The country’s biggest bank, the SM Group’s BDO
Unibank, Inc., earlier reported consolidated
trust assets under management (AUM) of P1
trillion for 2016, the first local bank to
breach the P1-trillion level. The bank’s AUM
increased by 12 percent year-on-year from P917
billion in 2015.

“2016 was a banner year for BDO both for
business growth and new product development in
terms of trust assets,” said Ador A. Abrogena,
BDO executive vice president and trust officer.
The AUM is the total of BDO’s Trust and
Investments Group with P755 billion and another
P273 billion from a subsidiary of BDO Private
Bank Wealth Advisory and Trust Group.

BSP Governor Amando M. Tetangco Jr. in the
meantime, said banks’ AUM could climb to R4
trillion as investors and fund managers gain
more assurance that the economy’s growth is
sustainable.

Only 2 out of
10 have deposit accounts - BSP
Tuesday, March 14, 2017
By JEANDIE O. GALOLO

ONLY two in ten Filipino households have
bank deposit accounts, a study by the central
bank has shown.

To increase the number, stakeholders in
government are proposing that the beneficiaries
of the conditional cash transfer (CCT) or
Pantawid Pamilyang Pilipino Program, who
constitute a large number of the unbanked
population, be allowed to directly save through
their cash cards.

“We have to encourage these people to save,”
said Bangko Sentral ng Pilipinas (BSP) Cebu
Director Leonides Sumbi during the presentation
of the results of the 2014 Consumer Finance
Survey to local stakeholders at the BSP Cebu
Regional Office yesterday.

Based on the quadrennial survey, only 14 percent
of Filipinos have deposit accounts in banks, and
this is even lower in Central Visayas, with 13.1
percent.

Cash cards issued by the Department of Social
Welfare and Development (DSWD) through banks
like the Land Bank of the Philippines (LBP),
rural banks, and microfinance institutions, are
purely for “cash out purposes,” and do not serve
as deposit accounts, said Land Bank Cebu vice
president Marilou Cardenas.

The problem with this, according to Department
of Trade and Industry (DTI) 7 Director Asteria
Caberte, is that CCT beneficiaries spend it
mostly on non-essential items when they are not
given the option to save.

The goal of the CCT, she said, is to transcend
the lives of the beneficiaries by first giving
them grants until they become self-sustaining
families.

But in some cases, which she personally
witnessed, the money is being used for less
important things like buying pirated DVDs for
entertainment.

If the cash cards can be used as deposit
accounts, both Caberte and Sumbi noted that this
will encourage the unbanked population to save,
no matter how minimal, without the need to go
through the usual and sometimes tedious process
of opening a bank account.

BSP Economic Statistics Director Rosabel
Guerrero said some of those who do not have
deposit accounts claim the requirement to keep a
maintaining balance puts them off.

“We will raise this to the higher management (in
BSP),” promised Sumbi, referring to the
possibility of having a cash card and a deposit
account in one for CCT beneficiaries.

Economic
forecasts for current year
Published March 9, 2017, 10:00 PM
by Dr. Bernardo M. Villegas

I have been joining road shows organized by
the First Metrobank Investment Corporation
(FMIC), the biggest local investment bank, in
various cities of the Philippines as well
outside the country. Business people in various
regions highly appreciate this service of FMIC
especially in these times of uncertainties in
both the domestic and global economies. Backed
by research of economists of the University of
Asia and the Pacific, the top executives of FMIC
have shared freely with their clients and others
valuable information that is needed by every
business to plan their operations for the
current year and beyond. The theme of the entire
briefing is “Riding the Winds of Change.” I
would like to share with my readers the key data
on the Philippine economy that have been
presented in these road shows.

The GDP forecast of 7% to 7.5% for 2017 is on
the high side of the government target, which is
6.5% to 7.5 % for the entire year. FMIC expects
the Philippine economy to sustain its growth in
2017 driven by higher capital investments as the
government ramps up infrastructure spending,
while the proposed tax reforms (expected to be
in place by June of this year) can buoy
consumption spending as the middle-income
households are the major beneficiaries of income
tax reduction. Consumer spending will continue
to benefit from OFW remittances which will
sustain its growth of 2% to 4% annually and
enhanced by the depreciation of the peso which
is expected to average for the year P51 to $1.
Inflation is expected to moderately rise by 2.8%
to 3.2% during the current year. The tax reforms
are seen to be inflationary. According to the
Department of Finance, the comprehensive tax
reforms can have a 1.8% inflation effect due to
its stimulative effect resulting from higher
disposable income of middle-income households.
Oil prices are not likely to rise beyond
$60/barrel due to increased supply coming from
shale gas in the United States. According to the
BSP, inflation will range between 2% to 4% for
the whole year.

FMIC expects exports to recover in 2017. The
strengthening of the US economy, which accounts
for 16% of the country’s total exports, and the
moderate recovery of the global economy are
expected to lift Philippine exports growth to
5%-8%. The country’s improved relationship with
China (our third largest export market) is also
expected to further boost exports. The BSP is
more conservative in its forecast of export at
2%. Imports will be growing at double-digit
levels of 10% to 14% as capital spending rises
(mainly due to infrastructure projects) as well
as higher oil imports. Infrastructure spending
is expected to be 5 to 5.5% of GDP. BSP expects
imports to rise at 10%. The exchange rate will
average at P51 to $1 as the peso comes under
pressure from a strengthening US dollar with
expected higher growth of the US economy and
several increases in US interest rates.

Interest rates in 2017 are expected to rise by
20 to 50 basis points from its year-end 2016
level. The short-end of the curve is expected to
go up by 20 basis points, the belly by 30 basis
points and the long-end by 50 basis points.
These forecasts are in line with expectations of
higher policy rate in the US and the PH,
increased spending for infrastructure, higher
inflation and risks coming from China’s economy
and uncertainties in the policies of President
Donald Trump of the US. The National Government
Debt to GDP will be at a low of 42 to 43% (one
of the lowest in the region). The Bank’s experts
on the stock market are making the fearless
forecast that the index will be at 7,500 by year
end, a projection assuming an Earning Per Share
growth rate (forward) of 8% (based on Bloomberg
estimate) and Price Earning ratio of 17x. This
implies an upside of 10% from the year-end PSEI
level of 6,840 (as of December 29, 2016).

As regards capital market issuances, FMIC
expects a flurry of companies tapping the
capital market in the first semester of the
year. There will a window for new equities issue
in 2017. Valuation will be very important.
Issuers are expected to be companies who are
market leaders in their sector and have strong
track records. Merger and Acquisition (M&A)
valuations will become reasonable given market
development. It would be advisable for companies
to acquire foreign and domestic targets. As
rates go up, weak companies are expected to face
more challenges, creating opportunities for
consolidation. FMIC plans more road shows, not
only in key Philippine cities, but in leading
Northeast Asian cities in China, Taiwan, South
Korea and Japan, the main beneficiaries of
increased interest of Philippine firms following
the “rebalancing strategy” of President Duterte.
These are the countries that will most likely
help the Philippines in implementing major
infrastructure projects and in giving a big
boost to manufacturing.

“So, in particular, what I find important and
exciting there is [this] would allow flexibility
on the online KYC. [This] is actually going to
be a major factor that can facilitate the
onboarding of new customers, especially unbanked
customers, customers in remote areas and
customers who don’t necessarily have government
IDs,” Espenilla said.

He further said government IDs and other
official documents for identity verification
will be allowed through electronic photographic
images and video-messaging service under certain
conditions.

Espenilla said the MB already approved the
amendments and should soon be signed by BSP
Governor Amando M. Tetangco Jr. anytime soon.

Espenilla expects the new rules and regulations
to encourage more financial consumers to reach
out to banks and boost the country’s overall
banking penetration rate.

Latest data from the National Strategy for
Financial Inclusion (NSFI) survey show that
while Filipinos exhibit a widespread or
98.3-percent awareness of banks, only about a
third, or 31.3 percent, have an account at a
formal financial institution, whether this be a
regular deposit account or a microdeposit
account.

Also, results of the survey show the average
length of time to travel to the nearest actual
bank branch in the Philippines is 26 minutes.

A two-way trip to the nearest actual bank branch
costs an average P52. This cost rises
exponentially in poorer and more rural areas of
the country.

Indian nationals in the country who are
engaged in “5-6” lending seem to be taking
seriously President Duterte’s order to the
authorities to put an end to that quasi-banking
activity.

According to reports, more than 200 people who
are involved in this underground business have
come out in the open and applied for
registration at the Securities and Exchange
Commission (SEC).

If these applicants are able to comply with the
capital and documentary requirements, the SEC
will issue to them a certificate of authority to
operate as financing or credit companies.

But once registered, they have to file
periodically with the SEC certain documents so
the latter can monitor, at least on paper, their
continuing compliance with the law.With the
certificate, they no longer have to do business
in the shadows or be obliged to grease the palms
of barangay officials to allow them to go
door-to-door in offering credit facilities to
potential clients.

For the Indian moneylenders, registration is a
small price to pay for the opportunity to engage
in a business that has low operating costs but
high returns, although fraught with the risk of
getting mugged (or worse, killed) when they do
their collection rounds.

Putting a name and a face on the people who make
credit available to financially-challenged
Filipinos at usurious interest is only one of
many steps that have to be taken to be able to
comply with the President’s directive.

No doubt, the P1 billion that the President has
promised to lend to micro and small enterprises
at 2-percent-a-month interest, with P2,000 as
the minimum loan, will be helpful to their
intended beneficiaries.

But unless the government can come up with a
viable alternative to the easily available
“financial assistance” that ‘5-6’ operators
provide to cash-strapped Filipinos in depressed
areas or public markets, the P1 billion will not
suffice to drive them out of business.

In fact, it is doubtful if those moneylenders
will change the manner they do business or lower
the interest rates they impose on their loans
simply because they registered their business
with the SEC.

Like many unscrupulous Filipino businessmen,
expect those informal lenders to pay lip service
to the duties and responsibilities that go with
a certificate of authority to operate a
financing company, and instead look to the
loopholes in the law that can help them earn
handsome profits without incurring any
liability.

The next item that should be in the government’s
agenda on this matter is the resolution of the
issue of what interest rates are considered
reasonable and therefore permissible, and what
are usurious and therefore prohibited.

Bear in mind that the Usury Law is no longer in
effect and there are no officially-prescribed
limits on interest rates for loans. The rule of
the thumb is, the parties to a loan agreement
are free to agree on the rate of interest to be
paid for the credit granted.

The Supreme Court has ruled that the
determination on whether an interest rate is
reasonable or usurious depends on the terms and
conditions of the loan, or the circumstances
under which it was incurred.

There is no hard and fast rule on this issue. A
15-percent interest on a particular loan may be
okay, but may be considered unconscionable in
another on account of, say, the conditions it
was incurred. In other words, the matter has to
be decided on a case-to-case basis.

On this point, the Department of Trade and
Industry, not the SEC, has to decide on the
range of interest rates that moneylenders can
legally impose on the loans or credit
accommodations (e.g., purchase of appliances)
they extend to their clients based on, among
others, the amount involved, payment period,
object of the loan, and paying capacity of the
debtor.

There can be no one-size-fits-all interest rate
for this type of moneylenders. It’s only fair
that they get a fair return on their investments
considering the risks they take in extending
credit to people they hardly know who live in
places that the police sometimes fear to enter
without backup.

That’s the easy part. The bigger problem is how
to effectively monitor their activities and make
sure they comply with the law considering the
limited manpower of the government’s regulatory
agencies.

The state-owned Land Bank of the
Philippines (Landbank) has proposed to
consolidate a critical mass of the country’s
small rural banks into one big entity that can
rival universal banks in terms of
capitalization.

Landbank is willing to contribute fresh capital
to own 51 percent of the proposed “Apex Rural
Bank,” which will have an authorized capital of
P5 billion and become the vehicle for
consolidation, Landbank president Alex
Buenaventura said in an interview with the
Inquirer.

Bunaventura said he submitted the proposal in
January to the Rural Bankers Association of the
Philippines (RBAP), which has more than 370
member-banks. The Landbank chief has given the
rural banks two years to consider this proposal,
which aims to help achieve long-term
competitiveness and sustainability among rural
banks.

“I told RBAP that instead of Landbank branching
in these areas, why not put up a joint venture
bank?” Buenaventura said, adding that the rural
banks have until end 2018 to consider the offer.

Rural banks that will join the proposed Apex
Rural Bank can contribute their business in
exchange for shares in the bigger institution.
Landbank can adjust its ownership depending on
how much net assets the participating rural
banks can pool.

“Apex is not an acquisition bank. It is a
consolidation bank. There’s no selling of shares
[for cash]. We need the resources, the branches,
the human resource, the critical mass. It’s
really a partnership,” Buenaventura said.

Being a former rural banker himself,
Buenaventura knows the challenges of being a
niche banking player. For two decades, he served
as president of One Network Bank (ONB), a
leading rural bank in the country. He led ONB
through its consolidation journey from the
synergy of three rural banks— the Rural Bank of
Panabo (Davao), Network Rural Bank (Davao) and
Provident Rural Bank of Cotabato. In 2014, the
Consunji family sold ONB to BDO Unibank.

ONB would not have been competitive if not for
its big capital that amounted to P4.8 billion at
the time BDO bought the bank, Buenaventura said.
“So big capital really is needed for a bank to
be sustainable. And big capital to me is at
least P5 billion,” he said.

Buenaventura estimated that average rural banks
in the country would typically have a net worth
between P50 million and P700 million. If
participating banks do not have enough net
assets to meet the 49-percent capital for Apex
Bank, he said Landbank might have to increase
its stake beyond 51 percent.

The consolidation scheme would also give weak
rural banks a chance to find a “white knight” in
Apex Bank, Buenaventura said. But even for the
stronger banks, he said this would be an
opportunity to be part of a more competitive
entity, especially with the big banks now
encroaching on rural banks’ traditional
territories.

Buenaventura said Apex Bank could also upgrade
the image of the rural banking industry, which
had been stigmatized by a wave of closures in
previous years.

For Landbank, Buenaventura said the proposed
investment in Apex Bank would be an “inclusive
branching strategy,” giving it a footprint in
more cities and municipalities and thereby
boosting its capability to pursue lending in the
countryside.
To date, Landbank has about 362 branches
nationwide, mostly in cities and first-class
municipalities. “We definitely need to have
presence in unserved areas for inclusive banking
purposes,” Buenaventura said.

The Landbank chief said he had mentioned the
Apex Bank proposal to the Bangko Sentral ng
Pilipinas (BSP), which was supportive given its
thrust to encourage consolidation in the banking
industry.

Based on the BSP’s latest report on the banking
system, rural and cooperative banks have a
combined network of 1,707 branches as of the
first semester of 2016. However, the BSP also
noted that universal and commercial banks have
extended their reach to areas considered as the
home turn of rural banks, namely first to fourth
class municipalities.

MANILA, Philippines - The Bangko Sentral ng
Pilipinas (BSP) has ordered the closure of
another rural bank as part of continued efforts
to weed out weak players from the banking
sector.

The BSP’s Monetary Board issued a resolution
prohibiting Rural Bank of Barotac Viejo (Iloilo)
Inc. from doing business in the Philippines.

The rural bank is based in Barotac Viejo in
Iloilo City and has two branches in Jaro and
Concepcion.
This is the second problematic bank ordered
closed by the central bank so far this year
after Countryside Cooperative Rural Bank of
Batangas last month.

State-run Philippine Deposit Insurance Corp.
(PDIC) has been directed to act as receiver and
to proceed with the takeover and liquidation of
both banks in accordance with Republic Act 3591
or the PDIC Charter as amended by RA 10846.

A bank that has been placed under liquidation
should in no case be re-opened and permitted to
resume banking business. Furthermore, the law
expressly provides that banks closed by the
Monetary Board should no longer be
rehabilitated.

Upon placement of any bank under liquidation,
the powers, functions and duties of the
directors, officers and stockholders of the bank
are terminated.

Accordingly, the directors, officers, and
stockholders are barred from interfering in any
way with the assets, records and affairs of
closed banks.

The BSP ordered the closure of 22 problematic
banks last year, eight more than the 14 banks
closed in 2015.

BSP Deputy Governor Nestor Espenilla Jr. earlier
said the country’s banking system has evolved
over the years with the closure of some players
as well as the mergers and consolidation of the
others.

Knowing how
much your business is worth
Jessie CarpioJessie Carpio
15 Feb 2017

How do I value my company, a client
recently asked me. The client’s company has been
in the red, losing money for years, but a buyer
is still interested. Many of the entrepreneurs
have been asking the same question: how does one
figure out the value of a business? For a famous
example, how did Jollibee come up with a P3
billion price for a 70 percent stake in Mang
Inasal way back in 2010?

I knew of entrepreneurs looking for investors
but had no idea how much percentage stake they
were supposed to give for the amount of money
they desired. There are also many business
owners who are already expecting to retire on
the funds generated by the sale of their
businesses. Since they do not know how much
their business is worth, they are apprehensive
that they might be pursuing a pretty risky
retirement strategy.

Given the importance of business value to
strategic planning, one would imagine that every
business owner already knows the value of his
business. However, I’ve found that this isn’t
always the case. In fact, since business owners
are so close to their businesses and know how
much hard work, time and money went into
building them up, they are often naturally
inclined to over-inflate the values.

There are a lot of reasons to get a business
valuation. In an article, Grant Thornton has
opined that, given the current economic
realities, privately held businesses (mostly
dynamic companies in the small and medium-sized
categories) in all sectors are looking for ways
to strengthen their performance, and a valuation
might just be the best starting point. Getting
to the value is important, but what many often
overlook is the strategic advantage in
understanding your “value drivers.” In other
words, it’s essential for business owners to
understand the factors that enhance the business
value so they can focus on these metrics to
drive their growth.

Determining a business value is as much an art
as a science. Fundamentally, the value of a
business lies in its ability to generate future
cash flow. One of the most common places to
start is an income-based approach; i.e.,
estimating the expected future cash flows and
then taking a hard look at the risks to
determine an appropriate discount or
capitalization rate.

This kind of approach looks at the company’s
business fundamentals and how the company
derives its economic benefits and when such
benefits can be earned. Since the economic
benefits are expected to be derived in the
future, there is an element of risk that has to
be factored in, usually in the form of either a
capitalization rate or a discount rate.

Another method is the asset-based approach,
which means adding up the values of the
underlying assets (minus all liabilities) of the
business. The basic premise is that if one has
to engage in a similar existing business
venture, one has to acquire all the assets and,
in the process, incur liabilities. The challenge
in this approach is the valuation of the assets
and liabilities, especially since there are
“intangibles” in a company’s business that might
not be captured in the statement of financial
position or balance sheet. An “intangible” can
be an exceptional client service or the
effective execution of their strategy.

A market-based approach, which compares a
business with others within the same industry,
is also commonly used. This approach looks at a
recent sale or purchase transaction of a similar
business, with an adjustment to the rates given
certain intrinsic values of the business. This
is where market forces come in, as we have to
look at the price a buyer is willing to pay and
which a seller is willing to accept. However,
for privately held businesses, this can be
difficult. Some companies use a valuation
formula to simplify the process, but this can
often be inaccurate or overly restrictive.
Once you’ve run all these numbers, you also have
to take into account some more intangible
factors, such as the changing industry, market
trends, or the impact of management structures.
And then, of course, there are brand strength,
customer and supplier relationships, name
recognition, patents and trademarks, and
proprietary technology, just to name a few.

Once you’ve done all these, you have the magic
number—or do you? While value tends to fall
within a range, there is never just one value
for a business. Buyers will determine their own
value—one of the reasons why there are often
differences between the “notional value” and the
street value when it’s actually put up for sale.

So, what’s the bottom line? Don’t wait until
you’re ready to sell to get a valuation.
Understand the business value today (mainly the
business drivers) so that you can plan for
growth tomorrow. Who knows, you might be the
next Mang Inasal.

Jessie Carpio is a partner and head of
BPS/Outsourcing. He is also the president of P&A
Grant Thornton Outsourcing Inc., an entity
wholly owned by P&A Grant Thornton. P&A Grant
Thornton is one of the leading Audit, Tax,
Advisory, and Outsourcing firms in the
Philippines, with 21 Partners and over 800 staff
members.

CAMARINES Sur Rep. Luis Ray Villafuerte is
urging Bangko Sentral ng Pilipinas to give more
leeway to banks to enable them to comply with
the Agri-Agra Law.

“I understand that banks are having a hard time
complying with the provisions of the law because
of the status of the credit worthiness of our
farmers, who cannot meet the collateral
requirements for loan applications. As for the
agrarian reform communities, most banks, even
rural banks, do not want to accept the
certificates of land ownership awards as
collateral,” he said.

He said the BSP should allow more alternative
forms of compliance to encourage banks to comply
with the provisions of the Agri-Agra Law or
Republic Act 10000.

He reacted to reports that loans extended by
banks to the agriculture sector in the first
nine months of 2016 amounted to P405.78 billion
for a 12.96-percent compliance ratio or below
the required 15-percent.

The compliance ratio of the banking system also
fell way short of the 10-percent threshold for
agrarian reform credit, he said, adding the
banks extended loans amounting to only P29.98
billion for a compliance ratio of a paltry 0.96
percent.

Villafuerte noted while the Duterte
administration had scored a “very good”
satisfaction rating of +61 in the 2016 fourth
quarter survey of the Social Weather Stations,
its efforts in “ensuring that no family will
ever be hungry” was a mere “good” at +34, which
was down from a “good” grade of +37 in the
September survey.

Its efforts in “fighting inflation” was only
“moderate” at +25 in the fourth quarter, which
was a grade down from “good” at +33 in
September.

Such tracking poll results would only indicate
the government must make initiatives to
strengthen the farm sector and stabilize food
prices, Villafuerte said.

He said the BSP could consider the
recommendation of the Bankers’ Association of
the Philippines to allow banks to enter into a
public-private partnership that would benefit
the agriculture sector as part of their
compliance with the mandated agri-agra loan
threshhold.

Land Bank of the Philippines president Alex
Buenaventura has also come up with a proposal

to partner with commercial banks to help small
farmers establish “corporatives” as another
alternative, he added.

Under the Agri-Agra Law, 25 percent of the
banks’ total loanable funds must be set aside
for agriculture and fisheries in general, of
which at least 10 percent should be made
available for agrarian reform beneficiaries.

The old law, Presidential Decree 717, allowed
bank loans for the housing and education sectors
as alternative forms of compliance.

But the revised law, Republic Act 10000, has
limited the alternative forms of compliance to
borrowers who intend to use their loans for
initiatives that shall also benefit the
agriculture sector.

Under RA 10000, the BSP has put in place a
stricter monitoring system to oversee compliance
and imposed penalties on banks that fail to meet
the law’s provisions, which led many lending
institutions to opt to just pay the penalty.

“The government has chronically failed to boost
farm yields, let alone attain self-sufficiency
in major crops, such as palay, because of
insufficient irrigation supply and lack of
credit facilities available to small farmers,”
Villafuerte said.

Banks and non-bank financial institutions
located in areas affected by typhoon “Nina” last
Christmas Day are granted regulatory relief
measures from the central bank for a “defined
period.”

The Bangko Sentral ng Pilipinas (BSP) has
approved regulatory and rediscounting reprieve
for banks with head offices, branches/extension
offices and microfinance-oriented banks in areas
identified by the National Disaster Risk
Reduction Management – upon the recommendation
of the Regional or Local Disaster Risk Reduction
Management – as being under a state of calamity.
These covered Regions 4-A, 4-B, 5 and 8.

“These measures will be in effect for a defined
period and covered by additional specific and
other prudential conditions,” said the BSP
yesterday.

The BSP approved several relief measures for all
rediscounting banks and a separate list for
thrift, rural and cooperative banks.

For all rediscounting banks, the BSP is grating
a 60-day grace period to settle the outstanding
rediscounting obligations as of declaration date
of a state of calamity (December 25, 2016) with
the BSP.

It is also allowing banks to restructure with
the BSP, on a case-to-case basis, the
outstanding rediscounted loans of end-user
borrowers affected by the typhoon.

For thrift, rural and cooperative banks, the
BSP’s Monetary Board approved the following
relief measures:

* Excluding outstanding loans of borrowers in
affected areas from the computation of past due
ratios provided these are restructured or given
relief;

*Non-imposition of penalties on legal reserves
deficiencies of thrift banks/rural
banks/cooperative banks/non-banks with head
offices and/or branches/extension
offices/microfinance-oriented banks in the
affected areas;

*Moratorium on monthly payments due to BSP for
banks with ongoing rehabilitation programs;

*Subject to BSP approval, booking of allowance
for probable losses on a staggered basis over a
maximum period of five years for all types of
credits extended to individuals and businesses
directly affected by the calamity; and

*Non-imposition of monetary penalties for delays
in the submission of supervisory reports.

Based on reports, typhoon Nina hit the Bicol
area most killing six people and displaced about
380,000 families.

The past year saw good news and bad news on
the jobs front in the country.

The good news was that the unemployment rate
broke below 5 percent to a new record low of 4.7
percent—the lowest I have seen on record. This
brought the number of jobless Filipinos down to
2.04 million from 2.37 million the year before,
or a drop in the ranks of the unemployed by
332,000 workers. Even more remarkable, this drop
in unemployment happened even with a higher
labor force participation rate, or the
percentage of those of working age (15 years or
older) who actively looked for work if not
already employed. All together, the labor force
grew by 1.54 million workers, but was well
outstripped by the 1.88 million net new jobs our
economy created in the same period—a remarkable
feat in light of our history of “jobless growth”
over more than a decade.

So what’s the bad news? The bulk (78 percent) of
the jobless are young workers between 15 and 34
years of age; half are in fact 24 years old and
below. More than one in every three (34 percent)
had actually gone to college, and one in five
(20.5 percent) is a college graduate. In short,
our country’s unemployment problem is actually a
youth unemployment problem. Too many of our
potentially most productive workers are out of
work. This is not a good situation to be in when
we have lately been priding ourselves in our
relatively unique position of having a
dominantly young population, now and especially
in the next 30 years when much of the world
would face the problem of aging.

If it’s any consolation, we are not alone in
this problem of youth unemployment. The
International Labor Organization, in its latest
World Employment and Social Outlook (2016),
observes that global youth unemployment is on
the rise, after a number of years of
improvement. ILO projects the number of
unemployed youth globally to reach 71 million in
2016 and remain at this level in 2017. The
deterioration is particularly marked in emerging
economies, where youth unemployment is projected
to worsen from 13.3 percent in 2015 to 13.7
percent in 2017. In Southeast Asia and the
Pacific, ILO projects the youth unemployment
rate to rise steadily over the coming years,
from 12.4 percent in 2015 up to 13.6 percent in
2017. This means that more than half a million
youth will have joined the pool of unemployed in
the region by 2017.

These trends, if not arrested, will push young
people to migrate, looking abroad for better
education and job opportunities. ILO cites data
showing that in 2015, almost 51 million
international migrants were aged between 15 and
29, more than half of whom moved to developed
economies. In that year, 20 percent of the
global youth population in that age range
expressed willingness to move to another country
permanently. The problem facing them is that
favored developed-country destinations are
lately becoming inhospitable to migrants, the
latest example being the United States, where
the new president won on a perceived
anti-immigration policy position.

But there is hope. The solution now appears to
lie increasingly in the youth themselves, as we
see more and more young people taking the lead
in creating the needed jobs for their age
cohort. Many of them are creating new and
innovative enterprises in economies being fast
transformed by new technology, including in
traditional industries such as agriculture and
transport. They pursue creative and innovative
products and services, along with new business
models made possible by the age of information
and communication technology. All these could be
facilitated by a supportive business environment
enabled by improved infrastructure and
enlightened policies.

With this in mind, the Philippines is pushing
youth entrepreneurship and innovation among the
key economic themes as host and chair of the
Association of Southeast Asian Nations this
year. Asean, after all, is a region where
unemployment is particularly a problem of the
young. And the Philippines, notwithstanding
recent strides in reducing joblessness, must
make sure its dominantly young population is
productively employed well into our future.

BANGKO Sentral ng Pilipinas urged banks and
other financial institutions to put up more
branches nationwide so that financial services
will be felt by the large number of unbanked
Filipino households.

The result of the 2014 Consumer Finance Survey
released by Bangko Sentral on Friday showed 86
percent of Filipino households did not have a
deposit account, while only 14 percent saved
their money in banks.

The foremost reason cited by the respondents for
not opening a deposit account was not having
enough money to keep an account. They also cited
the far location of a bank, high service
charges, a high minimum balance and lack of
trust on banks.

“Bank branching must be encouraged so that their
services will be felt by the majority of
population,” Bangko Sentral Deputy Governor Diwa
Guinigundo said in a briefing.

“Banking services must be more accessible to
everyone, a very important thing, for us to have
a more inclusive economic growth. We need to
strengthen efforts toward greater financial
inclusion. We have already started this and we
need to sustain this,” Guinigundo said.

Monetary Board member Felipe Medalla said aside
from bank branching, banks must also be allowed
to have cash agents, and people must “trust
these cash agents.”

The survey also showed that majority of
household heads employed in private
establishments and government were banked. In
contrast, majority of household heads who are
self-employed, worked for private household,
other household’s farm, and in other informal
occupations are unbanked.

The banking system held 83.1 percent of deposit
accounts of households. Other depository
institutions of households were
multi-purpose/credit cooperative (11.4 percent),
paluwagan (4.1 percent), and savings and loan
association (3.6 percent).

As designated receiver, the PDIC on Friday took
over the five-unit rural bank as well as its
affairs, assets, branches and records. Its head
office was located in Batangas City, while its
four branches were in Balayan, Lemery, Padre
Garcia and Tanauan, also in Batangas province.

According to the PDIC, Countryside Cooperative
Rural Bank of Batangas’ bank information sheet
showed that as of June 30 last year, it was
owned by the following: Soro-soro Ibaba
Development Cooperative (26.64 percent),
Binubusan Multi Purpose Cooperative (7.95
percent), Smammci (4.91 percent), as well as
other stockholders with no over 5-percent
ownership.

Its chief executive was Marisa T. Villoso, while
it was chaired by Josie G. Manalo.

The rural bank’s latest records also showed that
as of Sept. 30 last year, it had 10,552 accounts
with total deposit liabilities of P193.3
million, of which 86.8 percent or P167.7 million
were insured deposits.

“PDIC assures depositors that all valid deposits
and claims shall be paid up to the maximum
deposit insurance coverage of P500,000.
Depositors with valid deposit accounts with
balances of P100,000 and below shall be eligible
for early payment and need not file deposit
insurance claims, except accounts maintained by
business entities, or when they have outstanding
obligations with Countryside Cooperative Rural
Bank of Batangas or acted as co-makers of these
obligations,” the PDIC said.

Last year, the BSP closed down a total of 22
lenders, of which 21 were rural banks. RAM/rga

President Duterte has ordered the arrest of
those motorcycle-riding moneylenders prowling
Metro Manila’s slums and marketplaces to squeeze
their victims—store owners so desperate for cash
they are willing to borrow a fistful of pesos
and pay for it in full plus an arm and a leg.

Filipinos derisively refer to the loan sharks as
“Bumbay,” after the old name of Mumbai, capital
of Maharashtra state on the Indian west coast.

But use of the term goes back many decades, to
the time when Indians in the Philippines traded
domestic stuff, such as mosquito nets, blankets
and umbrellas, which they sold to Filipinos on
long-term plans that cost suckers a fortune.

Justice Secretary Vitaliano Aguirre II told
reporters on Tuesday the loan sharks were
operating here without permit from the
government and that Mr. Duterte had ordered
their arrest to put an end to their usurious
practices.

“The President ordered the arrest of Bumbay
because he pities the [poor Filipinos] who are
being sold overpriced appliances [in
money-lending schemes]. They could be arrested
without any warrant because when they are doing
that they are committing a crime,” Aguirre said.

Unconscionable rates
Aguirre explained that although the antiusury
law limiting interest rates has been repealed,
the Supreme Court has ruled that moneylenders
cannot impose unconscionable interest rates.

The Indians charge 20-percent interest per month
on loans they give to poor market vendors and
sari-sari store owners.

“It’s not illegal [to charge high rates], but
that’s unconscionable and we cannot accept that
kind of interest anymore,” Aguirre said.

Agriculture Secretary Manny Piñol said Mr.
Duterte gave the order to arrest the loan sharks
during the Cabinet meeting on Monday.

In a post on Facebook, Piñol said Mr. Duterte
instructed Foreign Secretary Perfecto Yasay to
inform the Indian Embassy in Manila about the
government’s plan to put an end to its citizens’
usurious lending scheme here.

He said about 50,000 men from India’s Punjab
state were involved in loan sharking in the
Philippines, charging interest of P1,000 on
P5,000 loans that must be paid in one month.

“They are violating Philippine laws by indulging
in a money-making business without the necessary
permits,” Piñol quoted Mr. Duterte as saying.

In our work as external auditors of various
companies, we need to obtain or update our
understanding of our clients’ businesses, assess
their internal controls and processes, review
their significant transactions and check for
critical changes made during the period under
audit, etc. During the process, we may note
certain deficiencies in internal controls or
processes of their companies and then we
recommend ways to correct these deficiencies.
These recommendations are discussed and agreed
with management and the board of directors, and
are formalized through our issuance of a
management letter. The adoption and
implementation of such recommendations, though,
rest with the companies’ management.

However, there are instances when the
deficiencies noted in the previous year remain
uncorrected in the current year. This happens
when the recommendations made and agreed during
the previous year were not properly implemented
or simply not implemented at all. In this
scenario, we reiterate with the management the
recommendation previously made until the
deficiencies are corrected.

Does the scenario above seem familiar? In our
lives, once another year comes to a close, we
tend to look back and see what happened, and
make a list of promises of things to do (or will
not do anymore); yes, this is most commonly
known as our “New Year’s Resolutions.” We
routinely make these resolutions every year and
then eventually notice: Aren’t these the same
things that I promised to do last year and the
year before that?

As we welcome 2017, my staff, Kaith and Kers,
and I decided to conduct a survey of the top
five New Year’s Resolutions that we, in the
company, failed to keep. We interviewed 50
individuals, randomly selected, with ages
ranging from 18 to 60, about their most commonly
broken New Year’s Resolutions. The results of
the survey are listed below:

#5 – “Be more diligent and stop procrastinating”
Doesn’t it feel great when you start the year
right by having so much energy to do everything
you need and want to do? Unfortunately for some,
this can be a very hard task to make. Sure, some
people have the “new-year-new-me” spirit during
the first few weeks of the year as they try to
do their best to achieve in a timely manner
whatever goals they have set, but once a
distraction appears, they get back to embracing
the “mañana” habit and start singing Annie’s
song again: “Tomorrow, tomorrow, I love you
tomorrow.”

#4 – “Be on Time”
How many times have we used the terrible and
obvious traffic in the city as the main reason
for being late for work, meetings and even
simple get-togethers? By now, the bosses have
heard all the excuses for being late so
subordinates should have worked out their
solutions. People are fully aware of the
consequences of coming to work late, but some
just cannot resist the imaginary magnetic force
pulling them back into bed for “just five
minutes more.”

#3 – “Adopt a healthy lifestyle”
This does not pertain solely to control over the
food we eat, but also to other unhealthy
activities like drinking too much soft drinks
and alcohol, smoking, and avoiding physically
rigorous activities, such as hitting the gym for
regular exercise. Though this landed on the
third spot, I think this is one of the most
commonly broken resolutions, as this requires a
lot of willpower. After all, why bother going to
the gym when you can just be a couch potato in
front of your favorite movie series while
bingeing on popcorn ice-cold sugar water, and
without that small voice behind you chastising
you as though you’ve committed a crime.

#2 – “Save money”
This is a very common resolution just after the
holidays, since it is the time when people have
grasped the extent of their spending on gifts
and other luxuries for Christmas. Also, saving
money is not an easy task for most people,
especially to those whose careers are just
starting to bloom and breadwinners who have
families depending on them. Some people,
meanwhile, cannot meet this objective because of
the desire to reward themselves with material
things from time to time for a job well done, to
console themselves after a stressful day at
work, or for whichever reason that would make
buying that glamorous bag or eating at that
fancy restaurant seem reasonable. We all have
different ways of coping with stress—most of
which involve spending, sadly.

And #1 – “Lose that weight/go on a diet”
It wasn’t a surprise at all that losing weight
(with 85 percent of the respondents) lies at the
top of our list of broken promises. This seems
to be a product of guilt after consuming all
those greasy and high-calorie foods during the
holidays. Most of the people are having
difficulty making this into a reality because
eating is such a delightful hobby and again, a
common way of dealing with stress.

Cliché as it may seem, the old saying rings very
true in this case: these resolutions are “easier
said than done,” as they require focus,
discipline and a lot of willpower to fulfill.
Making a list of the things you think you can
improve on is a good practice, but there’s no
need to wait for another year to pass to start
doing them. If you already have the proper
resources, delaying these resolutions would do
you no good. As they say, “today is always the
best day.”

Nelson J. Dinio is the head of Business
Development Group and Japan Desk of P&A Grant
Thornton. P&A Grant Thornton is one of the
leading Audit, Tax, Advisory, and Outsourcing
firms in the Philippines, with 21 partners and
over 800 staff members. For comments, please
email nelson.dinio@ph.gt.com or
PAGrantThornton.marketscomm@ph.gt.com. For our
services, visit our website,
www.grantthornton.com.ph.

Land Bank of the Philippines plans to
triple to P115 billion its lending to small
farmers and fisherfolk by 2022 by tapping what
the state-run lender called “corporatives.”

The Department of Finance announced that
Landbank’s target to drastically ramp up its
loan portfolio for the agriculture sector from
P37.9 billion at present was in line with
“President Duterte’s goal of dispersing the
benefits of growth to the countryside through
the development of the farm sector.”

According to Landbank president Alex
Buenaventura, he would initiate a reengineering
of the credit facilities for small stakeholders
in the agriculture sector and encourage them to
enter into “corporatives.”

“A corporation would be formed to manage the
consolidated farms of small farmers who wish to
take part in the corporative. The corporation
would be owned 40 percent by Landbank and 60
percent by participating commercial banks. The
farmers would provide the manpower to keep their
lands profitable,” Buenaventura explained.
Also, 99 percent of the corporation’s earnings
would be distributed to the participating
farmers pro-rata according to their respective
land ownership, while 1 percent would be
declared as dividends of the corporate owners,
Buenaventura added.

The Landbank chief also said that he would
discuss with regulators the plan to allow
commercial banks that would be part of the
corporative to strictly comply with the
Agri-Agra Law and allocate 15 percent of their
total loanable funds to farmers and fisherfolk
as well as 10 percent to agrarian reform
beneficiaries, instead of paying fines for
noncompliance.

“Also, a portion of the profits earned every
harvest by the farmers would be used by them to
buy equity in the corporation, until such time
that the 60 percent owned by commercial banks is
fully divested to the small farmers,” according
to Buenaventura.

The proposed corporative approach aims to make
small Filipino farmers globally competitive and
among the most productive and profitable in
Asia, Buenaventura said.

Landbank data showed that as of September, only
8.2 percent of the loan portfolio or P37.9
billion of the total P482 billion were infused
into the agriculture sector.

With an end-September net income of P10.3
billion—an improvement from P4.1 billion a
decade ago—Buenaventura said the lender was in a
very good position to further expand its
services, reach and support especially to its
mandated sector, the farmers and fishers.

Buenaventura said that under the corporative,
farmers could plant any of the following cash
crops that have high export potentials: Abaca,
banana, cacao, coconut, palm oil and rubber.

“Under the setup, the Department of Agrarian
Reform will identify the lands owned by small
farmers that can be formed into corporatives
cultivating rice, sugar and banana,” said
Buenaventura. “The scheme will also work for
palay farmers who could face new challenges next
year with the possible lifting of the
quantitative restrictions on rice in 2017.”

State planning agency National Economic and
Development Authority earlier disclosed the
decision of the majority of economic managers to
remove the Philippines’ quota on rice
importation as the government moves to lower the
prices of the Filipino staple food.

Economic managers have been pushing the
amendment of the decade-old Republic Act No.
8178 or the Agricultural Tariffication Act of
1996, which had put the rice import quota in
place. In 2014, the World Trade Organization
(WTO) allowed the Philippines to extend its QR
on rice until June 30, 2017, in a bid to buy
more time for local farmers to prepare for free
trade in light of the government’s goal of
achieving rice self-sufficiency.

Since the government imposes a quota on rice
imports, domestic prices are vulnerable to
shocks resulting from meager supply. The QR puts
the burden of rice supply and demand on the
government as market forces are being limited by
the quota system.

LandBank to
set up OFW Bank by September 2017
By Rea Cu -DECEMBER 20, 2016

THE Land Bank of the Philippines (LandBank)
will set up a bank co-owned by overseas Filipino
workers (OFWs) by September 2017, with an
authorized capital of P3 billion, to be able to
actively cater to the banking needs of Filipinos
working abroad.

Finance Secretary Carlos G. Dominguez III said
that, while the requirements and procedures to
establish the OFW Bank are still being
completed, LandBank will set up a representative
office in Saudi Arabia to cater to the banking
needs of 800,000 Filipino workers based in that
country.

The finance chief said the OFW Bank will be
established through LandBank’s acquisition of
the Philippine Postal Savings Bank Inc. (Postal
Bank), which will be converted into a LandBank
subsidiary that will be owned 30 percent by
OFWs.

“The acquisition of the Postal Bank will be
completed by the third quarter of 2017, after
all required procedures are completed and
approvals are secured. The LandBank has
sufficient resources to complete this
transaction,” Dominguez said.

As of September 30 this year, the LandBank
ranked as the country’s fourth-largest
commercial bank, with a total capital of P90.9
billion and assets amounting to P1.3 trillion.

LandBank President Alex V. Buenaventura said it
will take eight months to accomplish the
requirements that would convert the Postal Bank
into a LandBank subsidiary.

“The OFW Bank will be a listed company with an
authorized capital of P3 billion and a
subscribed capital of P2 billion, of which P1
billion is paid up by LandBank. Another P1
billion will be open for subscription to OFWs
who can acquire them by buying shares in the
bank,” Buenaventura said.

LandBank will have to seek clearances from the
Governance Commission for Government-owned and
-controlled Corporations and the Philippine
Competition Commission, as well as approvals
from the Monetary Board, Securities and Exchange
Commission and the Bangko Sentral ng Pilipinas
(BSP) for the OFW Bank to be operational by
September 1, 2017.

“We are going to do focus-group discussions with
representatives of our target markets to
determine where and what services are needed,
and what name and logo to adopt for the bank,”
Buenaventura said.

The finance chief said LandBank “will seek to
establish a unit in Saudi Arabia to assist the
OFWs there” while the OFW bank has yet to be
established.

Buenaventura said LandBank decided to open the
Saudi unit in Riyadh, because 40 percent of OFWs
based in that country reside there.

“The LandBank unit will be opened near the
Philippine labor office or near a place where
OFWs usually converge and meet,” he said.

Buenaventura also said starting January 2, 2017,
LandBank, with the involvement of the Commission
on Audit and the BSP, will begin undertaking due
diligence to start the process of converting the
Postal Bank into a LandBank subsidiary.

In earlier reports, Dominguez said the
transaction involving the buyout of the Postal
Bank may take 11 months to finish. The thrift
bank has total assets amounting to P12.07
billion as of March this year.

President Duterte has approved the proposal by
Labor Secretary Silvestre H. Bello III
establishing the Postal Bank becoming the
“Workers’ Bank” during a Cabinet meeting on
December 5.

Filipinos, it would seem, are the worst
savers in Southeast Asia. The numbers show it.
Measured as the ratio of gross domestic savings
to gross domestic product (the latter being a
measure of national income), our saving rate is
quite strikingly the lowest among our Asean
neighbors. Based on data from the Asian
Development Bank, our 15.2-percent domestic
saving ratio in 2015 was far lower than
Singapore’s 53.2, Thailand’s 35.4, Indonesia’s
33.2, Malaysia’s 32.7, Myanmar’s 31.8, Vietnam’s
25.7, Brunei’s 19.9, and even Cambodia’s 17.3
percent (no data were given for Laos). Judging
from these numbers, average income doesn’t
appear to explain our low savings, as often
cited to be the reason. Are Filipinos really
spendthrifts compared to other Southeast Asians?

Looking around, one is tempted to believe so.
After all, we have some of the biggest shopping
malls around the world. Most Filipino tourists’
idea of tourism abroad seems to be visiting the
malls and factory outlets. The average Filipino
wage worker seems to spend his/her income even
before earning it. We can see it in the “vale”
system, where a worker asks for an advance on
his/her wage well before payday—a practice that
is quite common in the Filipino workplace.
Employees commonly borrow from informal lenders
off incomes they have yet to earn. Ever have to
wait in line at an automatic teller machine
behind someone making several transactions with
a bunch of ATM cards? Chances are, that person
is a so-called “5-6” informal lender withdrawing
payments from debtors, who willingly surrender
their cards to their friendly neighborhood loan
shark as security for regular loans.

Why do Filipinos save so little, compared to
their Southeast Asian neighbors? A tempting
answer would be that most Filipinos are too poor
to save. But from the cited Asean comparisons,
lower average incomes can’t be the primary
explanation. A friend claims that Filipinos who
do save (that is, those with higher incomes)
have saving rates even exceeding that of
Singaporeans. But given wider income disparity
in our society, with the wide majority of
Filipino households earning barely enough to
support their basic needs, overall savings come
out lower. Wider poverty and inequity could be
the culprit, then.

But other friends disagree. We may not see it
readily, but the poor do save, say those who
have actually studied and worked with the poor
where they are, and they claim that there
remains great potential there for saving. They
point to the billions of pesos that flow through
the ubiquitous jueteng, the supposedly illegal
numbers game that remains widespread
nonetheless, primarily patronized by low-income
groups. While that’s gambling, not saving, it
still suggests that there is great wealth in the
poor, and much potential saving out there.

Researchers have documented how poor families
especially in rural areas stock up on certain
commodities—not necessarily durables like
jewelry or appliances, but even just storable
groceries—and then sell these off in times of
need for cash. That is saving. I’ve witnessed
many a rural household keep a pig tied up in the
backyard, fattening it mostly with kitchen
refuse collected from neighbors, and an
occasional kilo or two of rice bran. The pig is
sold or slaughtered in time of need, such as in
time for the kids’ school expenses. That is
saving. And then there are the “paluwagan”
schemes one seems to find in every poor
neighborhood, especially among the women. Again,
that is saving.

Who says the poor don’t save? They do, except
that they save in forms that never find their
way into the formal financial system or the
official economic statistics. Chances are, our
low officially reported saving rate is
substantially understated, given these various
unrecorded forms of saving actually undertaken
by the poor. What more if we can channel the
daily amount many of them stake in jueteng into
productive savings schemes instead? The
challenge, then, is how to capture the
substantial savings coming from lower income
groups into the financial pool, and mobilize
these for economic growth and development.

THE Bangko Sentral ng Pilipinas (BSP) has
warned anew supervised financial institutions in
Negros Occidental, particularly rural banks, to
be extra cautious against scammers and swindlers
especially during this holiday season.
BSP-Bacolod Branch Deputy Director Job
Nepomuceno told Sun.Star Bacolod they have
already issued an advisory to prevent local
financial institutions and other potential
targets from being victims of scams.

Nepomuceno said these scams are perpetrated
through communication, certification, or other
kinds of false representation that are made to
appear as officially issued by BSP or any of its
officials. “Their modus includes impersonating
Deputy Governor Nestor Espenilla Jr. or any of
our officials in soliciting donations and
contributions for specific events,” he said,
adding that these scammers strike anytime
especially during December when money
circulation is strong. It is not the practice of
BSP, and none of its officials are allowed to
solicit donations, monetary or otherwise,
Nepomuceno stressed.

Since the issuance of the advisory this month,
BSP-Bacolod Branch has not yet received any
report of such incident in the province. BSP,
however, said the public should not be
complacent because “they (scammers) might also
have their timing.” In victimizing financial
institutions, scammers or swindlers may copy or
imitate the BSP seal. Fake documents also
include forged and digitally copied signatures
of officials, Nepomuceno said. He added that
banks are advised to ask for assistance from
BSP-Bacolod Branch if they are not sure of the
authenticity of the documents alleged to be from
the BSP.

“We have to be proactive. We should be alert all
the time, not only during Christmas,” Nepomuceno
said. Moreover, aside from solicitation through
emails and written letters, the public may also
be victims of scams through text. Nepomuceno
said that last week, one of their staff received
a text message that she won a cash prize through
the BSP’s supposed promo. “We don’t have
programs like raffle or any contest that is
being announced through text message thus, the
public are warned to ignore this,” he added.

Demise of
Filipino life insurance sector
posted December 13, 2016 at 12:01 am by Rudy
Romero

Policymaking can be a very tricky activity
even under the best of circumstances. There are
several reasons for this. Undoubtedly the most
important of these is the fact that in the
pursuit of one policy desideratum, another is
often downgraded or cast aside. A prime example
of this is a situation that is unfolding before
our eyes.

The situation I speak of relates to the
Philippine life insurance industry. I use the
word ‘Philippine’ because it is to the
industry’s Filipino-owned segment that I am
referring. That segment is slowly being wiped
out, thanks to government policy.

The incipient demise of the Filipino-owned life
insurance companies is the side effect of
well-intentioned government policy toward the
life insurance business in this country. In this
instance a good intention has—as the oft-quoted
saying goes—paved the road to hell.

The policymakers’ good intention was their
desire to strengthen the domestic life insurance
companies to a point where they would be able to
meet the more intense foreign competition that
was bound to result from Philippine membership
of WTO (World Trade Organization) and the coming
into existence of the Asean Economic Community.

The regulator of the Philippine insurance
industry—the Insurance Commission (IC), a part
of the Department of Finance (DoF) family of
agencies—appreciated that there could be no
strengthening of the Philippine insurance
industry without a firming up of the equity
structures of the Filipino life insurance
companies. Accordingly, it issued a circular
requiring all those companies to raise their
paid-in capital to a certain minimum amount. The
capital buildup was to be completed by a certain
date, failing which the Filipino life insurance
companies would lose their operating licenses.

In essence, DoF and IC acted in a comprehensible
manner in requiring the Filipino life insurance
companies to undergo a capital buildup program.
Meeting intensified foreign competition does,
after all, require the infusion of additional
equity into their companies by the owners. If
the required additional capital infusion had
been within the owners’ capabilities, there
would have been no problem and the
need-to-meet-foreign-competition issue would
have been addressed.

Unfortunately that is not how things happened.
DOF/IC set the levels for the required
additional-capital infusion so high—several
hundreds of million pesos in some instances—that
the Filipino-owned life insurance companies
began to ask themselves if the government wanted
them to stay in business. In truth, hardly any
of the Filipino life insurance companies has
been in a position to produce the additional
equity required by DoF/IC. And even if by one
means or another—including borrowing—they were
capable of raising the required additional
capital, the Filipino life insurance companies
have been wondering whether it would be
worthwhile for them to comply with a new
requirement of a government that they consider
insensitive and uncaring.

Being unable—or, in one or two cases,
unwilling—to comply with the government’s
capital buildup program, a succession of
Filipino life insurance companies has chosen to
get out of an industry that they love and that
has been remunerative for them. Their ranks are
gradually being depleted by receiverships and
liquidations.

A case in point is Philippine Prudential Life
Insurance Co., a company founded around 50 years
ago by Daniel L. Mercado, a US-trained actuary.
Being unable to raise the required
additional-capital infusion, the company is now
in receivership. It is so sad that in the
twilight of his years Mr. Mercado should
contemplate the progressive demise—due to a
government policy change—of a company that he
brought to life and had nurtured all these
years.

Back to the point I made at the outset about the
tricky character of government policymaking.
Must a well-intentioned change in government
policy toward an industry give rise to negative
effects down the line in the same industry? In
the case of the Filipino-owned life insurance
companies, might the desired strengthening of
the Philippine insurance industry have been
accomplished without killing off life insurance
companies that were founded with Filipino
capital, were nurtured by Filipino professionals
and have not been a burden on this country’s
taxpayers?

Mention the numbers “5-6” to the man on the
street and the first thing that usually comes to
mind is Indian nationals (or Bombays, as they
are fondly called) going around the public
markets or depressed areas offering to lend
money to people who need it fast. The terms of
the loan are simple. It can be in cash or as
payment for a product that the borrower wants to
purchase. No collateral is needed to secure its
payment. As proof of the loan, the borrower
simply signs opposite his name on a small
notebook that shows the amount borrowed or
product bought.

A background check on the borrower’s
creditworthiness is seldom conducted. Often,
it’s enough that he has a permanent address, not
a transient of the place. The transaction can be
completed in minutes and no other documents are
signed or exchanged. If the credit extended is,
say, P5,000, the borrower has to pay P6,000
after a month. The lender will come at the
appointed date to collect the payment. Once the
debt is fully paid, the borrower’s entry in the
notebook is crossed out and he becomes eligible
for another loan.

Trade Secretary Ramon Lopez wants to put an end
to this kind of transaction because it
translates to an interest rate of 20 percent a
month, which is way above commercial lending
rates.

To meet this objective, Lopez said the
government would set aside P1 billion next year
to lend money to micro and small enterprises at
2-percent-a-month interest, with P2,000 as the
minimum loan. According to reports, 98 percent
of registered businesses in the country are
micro, small and medium enterprises and they
employ more that 50 percent of the national
workforce.

This is not the first time that the government
has made plans to reduce, if not eliminate, the
lending scheme that is identified with Indian
nationals. But the trade continues, and has even
expanded, in spite of the increase in the number
of financing and credit firms. It’s doubtful if
the proposed cut in the interest rate to 2
percent a month will wean away micro and small
businessmen from the 5-6 lending scheme.

The principal reason for the popularity or
acceptability of this transaction is
convenience. The borrowers do not have to look
for the lenders. The latter go to the public
markets or places where they think there are
people who need quick cash and have the capacity
to pay the loan. On the other hand, if a
prospective borrower wants to apply for a loan
with a financing company or a bank, he has to
dress up (or at least look presentable) and
visit its office, which is not only inconvenient
but can sometimes be intimidating.

Also working in favor of this grassroot-style
lending is the absence of the paperwork that
usually accompanies borrowing from formal
lending sources. There is no need to present
copies of income tax returns or other proof of
ability to repay the loan. It’s all a matter of
faith. The lender assumes that the borrower will
not renege on his promise to pay the loan when
it falls due. If the borrower absconds, that’s
considered part of the risks of doing business.

For the lender, the 20 percent interest a month
is sufficient compensation for the possibility
of failing to collect some loans or, worse,
getting mugged while in the process of during
his rounds. On the part of the borrower, the
exorbitant interest rate is considered a bitter
pill that they have to swallow to be able to
fund their small business or enjoy the small
pleasures of life.

The key to putting an end to the 5-6 lending
scheme is matching the lenders’ advantage in
convenience or easy accessibility. The planned
lending facility should have a visible presence
in public markets or in areas where micro and
small enterprises ply their trade so they need
not go far if they want to secure additional
funding for their business.

The documentation of the loans can be ticklish.
Because public funds will be lent out, the
transactions will have to comply with existing
banking and audit regulations. The loans should
be processed as fast as possible and with the
minimum of paperwork without sacrificing the
need to ensure that they are paid. Collection
can be a problem too. Because public money will
be lent out, the borrowers may treat them as
dole-outs to which they are entitled and
therefore need not be paid.

The proposed alternative to 5-6 lending scheme
should be carefully studied before its
implementation to avoid precious taxpayers’
money going down the drain or winding up in the
pockets of unscrupulous politicians.

SMALL BANKS can now resume setting up
branches in key Metro Manila cities previously
closed off to new entrants, as part of Bangko
Sentral ng Pilipinas (BSP) moves to reopen the
financial system even further to more players.

BSP’s Monetary Board has allowed rural and
cooperative lenders to open new branches all
over the Philippines, including Metro Manila
cities earlier deemed “restricted” areas due to
high density: Makati, Mandaluyong, Manila,
Parañaque, Pasay, Pasig, Quezon City and San
Juan.

However, such banks will have to meet higher
capital requirements and will be subject to
special licensing fees if they are to open
branches in these cities, in keeping with sound
risk management protocols.

Prior to this reform, only microfinance-oriented
lenders were allowed to set up shop in the
capital, in order to extend credit to micro and
small enterprises.

“Consistent with the BSP’s policy of promoting a
competitive banking environment and ease of
doing business, the Monetary Board approved the
amendments to the guidelines on the
establishment of branches to provide banks with
more flexibility in expanding their branching
network to strategic locations,” the central
bank said in a statement sent over the weekend.

“The move is aligned with the initiatives on
banking system liberalization which include the
removal of the branch moratorium in restricted
areas and the gradual lifting of the suspension
on the establishment of new domestic banks.”

OPENING UP
All banks operating in the Philippines must seek
Monetary Board approval before opening a new
branch anywhere in the country, and must comply
with regulatory standards.

The central bank lifted in 2011 a branching ban
on universal and commercial banks putting up new
offices within Metro Manila, as part of a
“phased-in” approach in liberalizing the local
banking sector.

However, it kept the restriction on rural and
cooperative lenders.

The BSP announced in February that it would
gradually lift a 1999 moratorium that halted the
entry of new domestic banks, except in unbanked
areas and for microfinance.

This reform was to be undertaken in two steps:
first, thrift banks will be allowed to apply for
licenses to upgrade to universal or commercial
bank status until mid-2017.

By Jan. 1, 2018, the ban on new licenses will be
lifted for all entities.

NO CHOICE
The simpler rules are seen to allow banks to
position themselves better as external players
come in, following the signing of Republic Act
No. 10641 that in July 2014 allowed the full
entry of foreign banks and the formal advent at
the end of December last year of Southeast
Asia’s economic community.

Currently, a rural lender needs a combined
capital of at least P1.5 billion to open a
branch in Metro Manila.

Such a bank should also be free of “major
supervisory concerns” and must comply with other
risk management guidelines set by the BSP,
according to the manual of regulations for
banks.

The local banking sector continued to expand
last semester with a total branch network of
10,318.

Regulators
and bank scams: A game of cat and mouse
By Bianca Cuaresma -DECEMBER 5, 2016

Part One

SENATORS stung by the $81-million Bangladesh
Bank cyber heist that dragged Philippine banks
and casinos into the fray are close to wrapping
up plenary deliberations to fast-track passage
of a law plugging loopholes in the Anti-Money
Laundering Act (Amla) to shield the banking
system from potential sanctions by the Financial
Action Task Force (FATF).

The Paris-based FATF is set to review in June
next year the Philippines’s compliance with
international safeguards against money
launderers.

Sen. Francis G. Escudero confirmed that Congress
is committed to frontload early approval of the
remedial legislation that would finally include
casinos in the list of covered institutions to
make the Philippines compliant with the
prescribed regulatory framework, in time for the
upcoming assessment by the FATF.

The international watchdog earlier raised
concern on the exclusion of casinos from the
coverage of the existing law.

The subject has been a contentious issue. But it
appears the inclusion of casinos in the law
received an unintended boost earlier this year
when the $81-million cyber loot stolen by
hackers from a Bank of Bangladesh account in the
New York Federal Reserve ended up in bogus bank
accounts in Manila and were ultimately laundered
in Philippine casinos and a local remittance
center.

Expanding coverage

ESCUDERO acknowledged that another key
consideration for ensuring the country does not
run afoul of global regulators is the possible
impact on millions of overseas Filipinos. He
said these Filipinos may face difficulty
transacting, especially when they remit earnings
to their families back home. Filipinos abroad
remitted over $25 billion last year, government
data show. Bangko Sentral ng Pilipinas (BSP)
data also showed that about $0.254 million was
remitted from Bangladesh last year.

The Senate Committee on Banks and Financial
Institutions, chaired by Escudero, has completed
public hearings on proposed amendments to the
Amla. The committee expanded the coverage of
Republic Act 9160 to include remittance centers,
as well as dealers of precious stones, jewels
and metals and other high-value items or goods.
The coverage would also include real-estate
developers, brokers and sales agents.

Escudero indicated Congress is sure to approve
inclusion of casinos among covered institutions
required to report to the Anti-Money Laundering
Council, under pain of sanctions for
noncompliance.

In addition, the proposed Amla amendments he
will ask Congress to adopt when he submits the
Banks Committee report to the plenary on
December 5 is the upward adjustment of the cash
threshold for any covered transactions at
“anything in excess of P500,000, or $10,000, or
other equivalent monetary instrument.”

High value

ESCUDERO said the Banks Committee is, in effect,
moving for the inclusion of “dealers or those
entities, like lawyers and accountants, acting
in behalf of clients whenever they receive cash
for profit or gains, exceeding P500,000.” In an
interview, the senators suggested that “if they
don’t want to be covered by the
antimoney-laundering law, then they should
transact or act in behalf of their clients with
checks, not cash.”

But he quickly clarified that “checks are
already covered by the reportorial requirements
of banks under Amla.”

Considered high-value items under the measure
are the following goods or items, which value
exceeds P1 million: motor vehicles, including
land, air and water vehicles; art and antiques;
and other luxury items, such as jewelry, watches
and bags.

Escudero explains that in tightening the net,
the committee opted to use “generic and catch
all terms.”

He said this was intended to correct “ambiguous
and evasive” terms used in the existing law.

“In the original act, it simply states jewelry,
with 50 percent of its value coming from the
precious stone used. But this is ambiguous and
evasive,” Escudero said. “What if you are paying
for the luxury brand itself and not the stones?
Then that’s already left out.”

The senator disclosed there were also “strong
calls to include luxury car dealers, but those
who deal choppers and planes and yachts will
also be left out, so we phrased the inclusion as
high-value goods to cover all.”

Confidence

ESCUDERO assured that the committee also moved
to endorse another key provision empowering the
antimoney-laundering regulators to “investigate
motu propio or upon the request of appropriate
departments or agencies transactions deemed
suspicious for possible money-laundering
activities.”

He acknowledged that the AMLC is already
empowered to directly file through the Office of
the Solicitor General a petition before the
Court of Appeals for immediate issuance of “a
freeze order against any monetary instrument or
property deemed laundered.”

The senator conceded, however, that the remedial
legislation is not likely to be passed into law
before lawmakers adjourn for the year-end
Christmas recess. However, he expressed
confidence the awaited bill will be enacted into
law shortly after Congress resumes sessions in
January.

“I am sure we will meet the June deadline [to
pass the amending law],” he said adding they are
targeting final passage of the remedial
legislation in both chambers “in the first
quarter of next year.”

Sanctions

IT was in August that regulators revealed that
steps were undertaken to probe what the BSP
called the “Bangladesh Bank cyber heist.”

In a statement, the Monetary Board said it
“approved the imposition of supervisory
enforcement action on RCBC [Rizal Commercial
Banking Corp.] to pay the amount of P1 billion,
in connection with the special examination
conducted” by the BSP relating to the Bangladesh
Bank cyber heist.

“This is the largest amount ever approved as
part of its supervisory enforcement actions on a
BSP supervised financial institution [BSFI],”
the BSP said in a statement dated August 5.
“This affirms the BSP’s strong commitment to
ensure the stability of the country’s financial
system through strong and effective regulation
of BSFIs.”

Available records revealed that the bank heist
occurred in February, wherein instructions to
steal about $951 million from the central bank
of Bangladesh—Bangladesh Bank—were issued via
the Society for Worldwide Interbank Financial
Telecommunication, or Swift, network.

Of the $101 million worth of transactions
orchestrated by hackers, about $81 million was
traced to the Philippines.

Part Two

EITHER at gunpoint or through a seemingly
innocent e-mail, bank scammers continuously and
cleverly evolve through the security maze of
regulations to be able to steal the hard-earned
money of consumers.

And while the means of monetary exchange and
instruments evolved through time, information
from the Bangko Sentral ng Pilipinas (BSP) shows
any monetary medium—
whether it be traditional bank notes, plastic
money or checks—is susceptible to fraudsters and
scammers.

Banknote security

AS old-design banknotes were losing their
security value and are getting easier to
falsify, the central bank in early 2015 launched
the demonetization of the old-design banknotes
in exchange for new, more securely designed
banknotes in an effort to maintain the integrity
of Philippine tender.

Along with the new design came new tactics of
cash counterfeiters. Among the relatively new
schemes, according to the central bank, involve
the extraction of a genuine security thread from
a low denomination bank note, say from a P20
bill or a P50 bill, and transferring these
security threads to fake money bearing higher
denominations like P500 bills and P1,000 bills.

More secure checks

CHECKS are also not spared from fraudsters.

In 2013 the central bank warned the public
against reported unscrupulous persons who pass
off fake checks as supposedly issued by the BSP
or the Central Bank of the Philippines—the
monetary authority’s former official name.

As modus operandi, the scammers would pretend to
be authorized BSP representatives and would ask
for money from victims in exchange for
fraudulent checks that are made to appear to be
worth millions of pesos each.

Aside from issuing public-information campaigns
that the central bank does not issue, secure or
guarantee checks, monetary authorities also
recently announced new and more secure check
designs.

BSP Assistant Governor Johnny Noe Ravalo said
the new check design—which will be called the
Check Image Clearing System (CICS)—will be
larger than size, with a length of 8 inches and
a width of 3 inches.

The new check, according to Ravalo, will also
contain new embedded security features to allow
for security and integrity to prevent check
fraud even if banks are not able to inspect the
actual physical check. Some new security
features will be visible to the naked eye. Some
features, however, can only be seen through a
scanner.

Latest scams

THE latest addition to the long list of scam
techniques in the country now include the
impersonation of BSP Deputy Governor for the
Supervision and Examination sector Nestor
Espenilla and other BSP officials.

Nearly a month ago, the BSP issued an advisory
warning the public of this new scheme.

The BSP said it received reports that a scam is
being perpetrated to target BSP-supervised
financial institutions, particularly rural
banks. The modus operandi of scammers include
posing or representing themselves as Espenilla.

“The swindlers, usually through telephone calls,
pose as the deputy governor who would want to
talk to the bank president or would request for
the latter’s contact details,” the BSP said.
“They use the name of Deputy Governor Espenilla
Jr. for the purpose of soliciting donations for
specific events or contributions of similar
nature.”

On the same week, the BSP also issued alerts
also involving impersonators of Espenilla, this
time targeting the depositors of closed banks,
representing themselves as having the capacity
to facilitate the immediate release of deposits
from padlocked banks.

“The BSP warns the public, especially depositors
of closed banks, against such scam. Claims for
payment of deposits in closed banks should only
be coordinated with the Philippine Deposit
Insurance Corp. [PDIC] which is the government
agency responsible for the processing of claims
and release of deposit insurance to depositors
of closed banks,” the BSP said.

Asean technology

AS the BSP moves to put regulations a step ahead
from current scamming trends, Tetangco also
cautioned in their move to adopt new technology
citing the security risks that come with these
technologies.

The BSP governor said as the banking industry
faces the dawn of the Asean regional banking
integration, local players must be vigilant with
the risks that comes along with the new
innovations to be introduced to the market.

“As we consider supply chains and regional
integration, we must be mindful of the trend of
‘disruptive innovation’,” Tetangco said in a
recent speaking engagement. “In other words:
finding new ways of doing old things.
Technological improvements are helping define
new ways for you to ‘enter’ into and be
integrated in the supply chain.”

Tetangco added that “in doing so, there is a
need to be mindful that using financial
technology could lead to new and unanticipated
financial, business, consumer protection risks,
as well as cyber-security risks.”

“This is why, even as we encourage technology
solutions, we also admonish banks to do so with
caution and without sacrificing financial
stability and the protection of your ultimate
customer, the consumer,” he added.

BSP shuts
down 21st bank for year
By Lawrence Agcaoili (The Philippine Star) |
Updated December 4, 2016 - 12:00am

MANILA, Philippines - The Bangko Sentral ng
Pilipinas (BSP) has padlocked another
problematic bank, bringing to 21 the number of
shuttered lenders this year as part of efforts
to protect the depositing public from weak
players.

The BSP’s Monetary Board issued Resolution
2133.A last Dec.1 prohibiting Xavier-Tibod Bank,
Inc. (A Microfinance Rural Bank) in Misamis
Oriental from doing business in the Philippines
and placing it under the supervision of the
Philippine Deposit Insurance Corp. (PDIC)

As a result, a total of 918 accounts containing
deposits worth P7.9 million as of end-September
were frozen under PDIC supervision.

Of the total, insured deposits amounted to P7.7
million, accounting for 97.8 percent of the
entire deposit accounts. PDIC assured depositors
with valid claims up to the maximum insurance
coverage of P500,000 will be paid.

It is scheduled to hold a Depositors-Borrowers’
Forum on Dec. 14.

The number of banks, mostly based on the
countryside, closed down this year had already
surpassed last year’s 14, BSP data showed.

BSP shutters
another rural bank in Negros Occidental; 20th
this year
Posted on November 21, 2016

THE BANGKO SENTRAL ng Pilipinas (BSP) has
shuttered another rural bank in Negros
Occidental deemed unfit to remain in business,
bringing the number of lenders closed this year
to 20.
In a statement, the Philippine Deposit Insurance
Corp. (PDIC) said the Monetary Board has ordered
the closure of Community Rural Bank of Magallon,
Inc. on Nov. 17. Last Friday, the state insurer
took over the bank as receiver and assumed its
assets, which will then be sold in order to pay
its deposit liabilities.

As the regulator of the country’s banking
system, the BSP may order the closure of problem
banks if found incapable of sustaining its
operations without causing losses to depositors.

The bank, which operates one branch in Moises
Padilla, Negros Occidental, is led by its
president Robert R. Tillaman and chairman Naoya
“Dan” Sakamoto, the PDIC said in a statement.
Its biggest shareholder is the Magallon
Integrated Holdings Corp. with a 30.55% stake,
alongside eight individuals who have investments
in the rural bank.

The provincial bank held deposits totalling
P28.5 million across 1,315 accounts as of
end-June, PDIC said, with P24.5 million covered
by deposit insurance.

All bank deposits are insured up to P500,000 per
account, according to the law.

Depositors whose claims stand at P100,000 and
below can avail of early payment and would not
need to undergo the formal process of filing for
claims, excluding corporate accounts and those
with outstanding dues at the bank.

The Community Rural Bank of Magallon is the
second Negros Occidental-based lender to fold
this year, following the Rural bank of
Binalbagan, Inc. in June.

Other lenders closed down by the BSP are the
Rural Bank of Salinas, Inc. and the Rural Bank
of Amadeo, Inc. in Cavite; the Community Rural
Bank of Dingras, Inc. in Ilocos Norte;
Sampaguita Savings Bank, Inc. in Laguna; Rural
Bank of Luna, Inc. in Isabela; Rural Bank of
Claveria, Inc. in Cagayan; Rural Bank of Alabat,
Inc. in Quezon; Rural Bank of Cabadbaran, Inc.
in Agusan; and Rural Bank of Siaton, Inc. in
Negros Oriental.

Also closed earlier this year were the
state-owned GSIS Family Bank; Surigao City
Evergreen Rural Bank, Inc.; Rural Bank of
Malinao, Inc. in Aklan; Koronadal Rural Bank,
Inc. in South Cotabato; Rural Bank of Panay,
Inc. in Capiz; Rural Bank of Basay, Inc. and the
Rural bank of Bayawan, Inc. in Negros Oriental;
the Lapu-Lapu Rural Bank, Inc. in Cebu; and the
Rural Bank of Villaviciosa, Inc. in Abra.

The central bank shut down 14 banks in 2015.

The PDIC is also set to conduct a public bidding
for 57 assets on Dec. 14, priced at a minimum of
P39.6 million as part of its fund-raising
activities.

The assets to be sold include 55 residential
lots, a mixed-use residential and farming lot,
and one agricultural lot, which will be
auctioned in an “as-is, where-is” basis.
Majority of the properties were seized assets
from closed banks. -- Melissa Luz T. Lope

NEW Land Bank of the Philippines President
Alex Buenaventura vowed to focus on easy-access
lending to farmers.

As the 9th president and CEO of LandBank,
Buenaventura said in a statement that the bank
aims to triple lending to small farmers and
fishers from the current P37.9 billion to P115
billion by 2022.

“We will build on the gains of LandBank over the
years and channel these resources to support the
farmers and fishers and other marginalized
sectors. I will take the lead in reinforcing the
bank’s development mandate which is anchored on
promoting inclusive economic growth especially
in the countryside, with a stronger focus on
helping farmers and fishers,” Buenaventura said
in his speech during his oath taking ceremony
last November 11.

He underscored that to achieve this goal,
re-engineering of LandBank’s lending to farmers
and fishers through cooperatives will be
undertaken.

“We will look into reorganizing small farmer
cooperatives to enter into ‘contract growing
with farm management agreement’ with big
agri-buyers/processors of high yielding
long-term cash crops. These include Cavendish
banana, palm oil, rubber and cacao, among
others,” he said.

The strategy, he said, will enable
buyers/processors to totally manage the compact
farms of individual small farmers.
He added the bank will also explore other
innovative ways of expanding their support to
agriculture.

Last week, Buenaventura served as one of the
speakers of the Philippine Development Forum at
the SMX Convention Center, wherein he said
promotion of large-scale expansion of big
agriculture buyers and processors is needed by
negotiating a fair contract growing with small
farmers.

He cited inaccessibility to bank loans and
contract growing agreements with agriculture
buyers and processors by small farmers is the
major problem of the industry.

Buenaventura brings with him 36 solid years of
banking experience.

Before his appointment as LandBank president, he
served as president of One Network Bank Inc., a
Rural Bank of BDO, following BDO’s acquisition
of One Network Bank (ONB) in December 2014.

He is also known for being a staunch advocate of
inclusive banking and countryside development.

Prior to this, he served as president of ONB
since 2004, leading the bank through its
consolidation journey from the synergy of three
rural banks – the Rural Bank of Panabo (Davao),
Network Rural Bank (Davao), and Provident Rural
Bank of Cotabato.

The National Economic and Development
Authority (Neda) board has given the green light
to P270-billion worth of new infrastructure and
agriculture projects, and likewise approved new
guidelines for the thorough screening of
China-assisted projects, the government said on
Tuesday.

The approval of new projects brings to nearly
P500 billion the Neda board’s approved projects
in the first five months of the Duterte
administration, Malacañang said.

The seven newly approved projects are: the south
line of the North-South Railway Project; the
scaling up of the Second Cordillera Highland
Agricultural Resource Management Project; the
expansion of the Philippine Rural Development
Project; the widening of the General Luis Road
from Quezon City to Valenzuela; the New Cebu
International Port; Stage 2 of the
Malitubog-Maridagao Irrigation Project; and the
New Nayong Pilipino at Entertainment City.

The guidelines of Neda’s Investment Coordination
Committee (ICC) for processing China-backed
projects were tackled during a board meeting on
Monday, according to the President’s
spokesperson, Ernesto Abella.

Suppliers should be of “good standing” and the
contracts must be favorable to the government,
the guidelines said.

The source of financing for pre-investment
studies must also be free of ties to any
particular country, technology, or lender.

The President earlier agreed to designate Neda’s
ICC as the focal point of the management of the
Philippine’s relationship with China. The ICC
would be tasked with vetting business deals with
China.

This came about following reports that the
Philippines signed memorandums of understanding
for the conduct of feasibility studies on
infrastructure projects with Chinese firms that
were blacklisted by the World Bank.

As designated receiver, the PDIC took over the
bank as well as its affairs, assets, branches
and records. The bank’s head office is located
at Marseilla Street, Barangay Muzon, Rosario,
Cavite. It had two branches.

“Under Section 13 of Republic Act (RA) No. 3591
(PDIC Charter), as amended by RA 10846, a bank
that has been placed under liquidation shall in
no case be re-opened and permitted to resume
banking business. Furthermore, Section 12
thereof expressly provides that banks closed by
the Monetary Board shall no longer be
rehabilitated,” the PDIC said

Philippine
Prudential Life now under conservatorship
posted November 11, 2016 at 11:45 pm by
Gabrielle H. Binaday

The Insurance Commission placed troubled
pre-need company Philippine Prudential Life and
Insurance Co. under conservatorship and
suspended its authority to sell new products.

Insurance Commissioner Emmanuel Dooc issued the
advisory on Friday after PPLIC failed to comply
the regulatory requirements. The pre-need
company is owned by the family of president and
chief executive Gregorio Mercado.

Dooc said claimants with issues with the company
may file their complaint to PPLIC conservator
Moises Balon.

PPLIC has been placed under receivership since
2012.

The IC decided to liquidate PPI after
considering the evaluation made by an IC team,
the appointed receiver and the actuary assigned
to conduct technical analysis on the proposed
rehabilitation plan.

Based on the IC-approved liquidation plan, the
first tranche of distribution will come from all
the liquid trust fund assets that are in the
form of cash or easily convertible to cash, such
as government bonds, money market instruments
and listed shares of stock.

The second tranche comprises of the non-liquid
trust fund assets of PPLIC, which will be
converted into cash or sold. The residual assets
will be distributed last, subject to the court’s
order under the liquidation case to be filed by
the IC.

Dooc said the IC, along with the IC-appointed
liquidator, was implementing the approved
liquidation plan and was in the process of
converting the non-liquid trust fund assets into
cash for distribution to plan holders.

The release of the first tranche for pension,
life and education plan holders, funded by the
liquid assets belonging to each trust fund,
started in August 2013.

The release of the second tranche for education
plan holders began in September 2015. It was
funded by the proceeds from the sale of a 1,100
square-meter lot in Bonifacio Global City in
December 2014.

BBSP moves to
seal gap in liquidity safeguards
Posted on October 25, 2016

THE BANGKO SENTRAL ng Pilipinas (BSP) plans
to impose a 20% minimum liquidity ratio (MLR) on
smaller banks and quasi-banking entities in
order to ensure they have sufficient buffers
against financial stress, as part of a wider
thrust towards improved risk management at a
time of heightened market volatility.
A draft circular currently under industry
consultation seeks to require BSP-supervised
entities that are not covered by the Liquidity
Coverage Ratio (LCR) announced last March to
have liquid capital equivalent to 20% of total
liabilities at any given time.

BSP Deputy Governor Nestor A. Espenilla, Jr.
said in an Oct. 7 speech before bankers that
more macroprudential regulations are in the
works, including those that give “specific focus
on the management of intraday liquidity.”

The MLR will cover thrift, rural and cooperative
banks, as well as other quasi-banking entities
like investment houses that are outside the
scope of liquidity standards under the
international Basel 3 regime, which requires
financial firms to keep a stash of high-quality
liquid assets.

“BSP-supervised financial institutions (BSFIs),
regardless of size, are expected to maintain a
sufficient level of liquidity to meet their
obligations under both normal and stressed
conditions,” read the new regulations being
proposed by the BSP, a copy of which was
obtained by BusinessWorld.

“This entails a strategy that enables prudent
fund management as well as compliance with
minimum quantitative liquidity requirements...,”
the document explained.

“BSFIs shall maintain a liquidity buffer
proportionate to their on- and off-balance sheet
liabilities,” it added.

“In this regard, a prudential minimum liquidity
ratio of 20% shall apply to BSFIs absent a
period of financial stress.”

The draft rules define MLR as the share of a
firm’s stock of liquid assets against total
liabilities.

Considered eligible liquid assets are a bank’s
cash on hand, other cash items, claims from the
BSP, debt securities with zero risk weight and
deposits in other banks, subject to a 50%
haircut (percentage by which market value is
reduced to take into consideration factors like
capital and other requirements).

The BSP has the option to require an additional
10% should the regulator find “particular
concerns” on the liquidity exposure of a certain
entity.

Banks must also monitor the share of liquid
assets in terms of both the peso and foreign
currency deposit units where there is
“significant activity.”

All firms must also submit a monthly report on
MLR compliance, according to the draft
regulations.

BSFIs may use their stock of liquid assets in
the event of a funding crunch or unforeseen
liquidity needs, the BSP said.

The BSP should be notified if a lender were to
fail to meet the 20% ratio for three banking
days within a two-week rolling calendar period,
complete with an explanation and a plan of
action to return to the MLR level.

A shortfall in the amount of liquid assets will
warrant heightened supervision from the central
bank, while failure to meet the standard for a
“prolonged” period would lead to remedial action
and possible sanctions.

The BSP in March announced a phased-in
implementation of the LCR that requires
universal and commercial banks to hold easily
convertible assets to cover total net cash
outflows for a 30-day period.

The central bank had set an “observation period”
for the new liquidity rule from July this year
to end-2017, during which lenders are required
to report their LCRs to the central bank.

By Jan. 1, 2018, banks’ asset coverage must
account for at least 90% of total net cash
outflows, eventually hitting 100% by Jan. 1,
2019.

Another macroprudential standard, the Net Stable
Funding Ratio -- involving longer-term
“reliable” sources of funding -- is also being
finalized by the BSP and eyed to be rolled out
by yearend.

MANILA, Philippines - The number of banks
operating in the Philippines continued to
decline in the first half amid the continued
consolidation of banks, as well as the exit of
weaker players particularly rural banks, the
Bangko Sentral ng Pilipinas (BSP) reported
yesterday.

Data from the central bank showed the number of
big and small banks operating in the country
reached 618 in end-June, 20 less than the 638 in
end-June last year.

The number of big banks or universal and
commercial banks went up to 41 in end-June from
36 in end-June last year with the entry of new
foreign banks.

These comprised of 21 universal banks consisting
of 12 private domestic banks, three government
banks and six foreign bank branches as well as
20 commercial banks comprised of five private
domestic banks, two foreign bank subsidiaries
and 13 foreign bank branches.

President Aquino signed RA 10641 in July last
year amending the foreign bank law by removing
the limit of foreign banks in the country
earlier set at only 10.

The BSP has so far given eight foreign banks the
green light to operate in the Philippines. These
include Sumitomo Mitsui of Japan, Shinhan Bank
of South Korea, Cathay United Bank of Taiwan,
the Industrial Bank of Korea, Yuanta Bank of
Taiwan, the United Overseas Bank Ltd. of
Singapore, Seoul-based Woori Bank and First
Commercial Bank of Taiwan.

The BSP said the number of thrift banks reached
64 in end-June from 69 in end-June last year,
while the number of rural and cooperative banks
decreased to 513 in end-June from 532 a year ago

MANILA, Philippines - The number of banks
operating in the Philippines continued to
decline in the first half amid the continued
consolidation of banks, as well as the exit of
weaker players particularly rural banks, the
Bangko Sentral ng Pilipinas (BSP) reported
yesterday.

Data from the central bank showed the number of
big and small banks operating in the country
reached 618 in end-June, 20 less than the 638 in
end-June last year.

The number of big banks or universal and
commercial banks went up to 41 in end-June from
36 in end-June last year with the entry of new
foreign banks.

These comprised of 21 universal banks consisting
of 12 private domestic banks, three government
banks and six foreign bank branches as well as
20 commercial banks comprised of five private
domestic banks, two foreign bank subsidiaries
and 13 foreign bank branches.

President Aquino signed RA 10641 in July last
year amending the foreign bank law by removing
the limit of foreign banks in the country
earlier set at only 10.

The BSP has so far given eight foreign banks the
green light to operate in the Philippines. These
include Sumitomo Mitsui of Japan, Shinhan Bank
of South Korea, Cathay United Bank of Taiwan,
the Industrial Bank of Korea, Yuanta Bank of
Taiwan, the United Overseas Bank Ltd. of
Singapore, Seoul-based Woori Bank and First
Commercial Bank of Taiwan.

The BSP said the number of thrift banks reached
64 in end-June from 69 in end-June last year,
while the number of rural and cooperative banks
decreased to 513 in end-June from 532 a year ago

BSP Deputy Governor Diwa Guinigundo said there
are banks abroad that have expressed interest to
do business in the Philippines, although he did
not disclose these.

The central bank previously said that foreign
banks account for less than 10 percent of the
total banking industry’s assets.
Since Republic Act 10641, the law allowing full
entry of foreign banks in the Philippines, took
effect in July 2014, eight banks have begun
operations in the country.

The latest to enter is the First Commercial Bank
of Taiwan, the third Taiwan-based lender in the
county.

The others include the Sumitomo Mitsui of Japan,
Shinhan Bank of South Korea, Cathay United Bank
of Taiwan, Industrial Bank of Korea, Yuanta Bank
of Taiwan, and the United Overseas Bank Ltd. of
Singapore.

The central bank also allowed Korea’s Woori Bank
to acquire a 51-percent stake in the Gaisano
family’s Wealth Development Bank through the
Viscal Development Corp.

While BSP looks forward to welcoming more
foreign institutions, it has also closed down an
increasing number of rural banks. Rural banks
that have been closed this year reached 15,
which is more than last year, said Guinigundo.

The BSP official said this has to be done to
protect public depositors.

“First, if we see that they are doing an unsound
and unsafe banking practices, that’s one of the
criteria (in closing a bank). Second, we decide
if these banks will not endanger the depositors
and the general public,” the central bank
official said.
Data from the BSP shows that the number of banks
in the first quarter of this year reached 622,
down from the 646 last year. Of the 622 banks,
515 are rural and cooperative banks, lower from
the 541 banks.

BSP Deputy Governor Diwa Guinigundo said there
are banks abroad that have expressed interest to
do business in the Philippines, although he did
not disclose these.

The central bank previously said that foreign
banks account for less than 10 percent of the
total banking industry’s assets.
Since Republic Act 10641, the law allowing full
entry of foreign banks in the Philippines, took
effect in July 2014, eight banks have begun
operations in the country.

The latest to enter is the First Commercial Bank
of Taiwan, the third Taiwan-based lender in the
county.

The others include the Sumitomo Mitsui of Japan,
Shinhan Bank of South Korea, Cathay United Bank
of Taiwan, Industrial Bank of Korea, Yuanta Bank
of Taiwan, and the United Overseas Bank Ltd. of
Singapore.

The central bank also allowed Korea’s Woori Bank
to acquire a 51-percent stake in the Gaisano
family’s Wealth Development Bank through the
Viscal Development Corp.

While BSP looks forward to welcoming more
foreign institutions, it has also closed down an
increasing number of rural banks. Rural banks
that have been closed this year reached 15,
which is more than last year, said Guinigundo.

The BSP official said this has to be done to
protect public depositors.

“First, if we see that they are doing an unsound
and unsafe banking practices, that’s one of the
criteria (in closing a bank). Second, we decide
if these banks will not endanger the depositors
and the general public,” the central bank
official said.
Data from the BSP shows that the number of banks
in the first quarter of this year reached 622,
down from the 646 last year. Of the 622 banks,
515 are rural and cooperative banks, lower from
the 541 banks.

TO MAKE farming and agriculture sexier to
the youth, money could be the “sexiest
attraction” of all, according to the Department
of Education (DepEd).

Education Secretary Leonor Briones said she was
mulling over a policy declaration that would
urge companies involved in immersion programs
for farming and agriculture students to give
them allowances or some form of honorarium.

In a hearing of the Senate committee on
education, arts and culture on Monday, senators
and education officials agreed that there was a
need to make agriculture courses more appealing
to students following the low turnout of
enrollees in the agriculture strand of the
Senior High School (SHS) program.

Sen. Sherwin Gatchalian, vice chair of the
committee, asked education officials how many of
those in the technical-vocational-livelihood
strand were in agriculture.

Gatchalian said agriculture courses being not
appealing to young people posed a big problem in
the future since 60 percent of the country’s
current workforce was in agriculture.

“Our country generates about 40 percent of its
GDP from agriculture. If we don’t have a future
workforce going into agriculture that will be a
big problem in the immediate term. So maybe we
can also be enlightened as to how to make it
sexier for students to join the agriculture
strand,” he said.

Contrary to these statistics, however, the
Department of Agriculture in March reported the
agriculture sector employed over 30 percent of
the Philippine workforce but contributed less
than 15 percent to GDP.

Agreeing that agriculture courses needed some
spicing up, Briones said that if the government
wanted to attract more young Filipinos to take
up agriculture “we have to make it financially
viable for them.”

“If we are thinking of how to make agriculture
sexy, economics and finance is the sexiest
attraction of all,” she told the committee
chaired by Sen. Bam Aquino.

“If we are thinking of how to make agriculture
sexy, economics and finance is the sexiest
attraction of all,” she told the committee
chaired by Sen. Bam Aquino.

Data presented by DepEd showed that out of the
1.517 million students enrolled in the SHS
program, 60.27 percent or over 914,000 students
signed up for its academic track while
enrollment in the
technical-vocational-livelihood track was at
39.15 percent.

More rural
banks closing this year
By Lawrence Agcaoili (The Philippine Star) |
Updated August 21, 2016 - 12:00am

MANILA, Philippines - The Bangko Sentral ng
Pilipinas (BSP) has already closed 15 banks so
far this year, exceeding the number of closures
made a year ago as it tightened its lid over
financial institutions.

The BSP’s Monetary Board has issued Resolution
1464, prohibiting the Rural Bank of Claveria
(Cagayan) from doing business in the Philippines
pursuant to Sec. 30 of Republic Act 7653 or The
New Central Bank Act.

The closed rural bank was placed under the
supervision of the state-run Philippine Deposit
Insurance Corp. (PDIC).

The Monetary Board earlier issued Resolution
1317 last July 28 prohibiting the Rural Bank of
Cabadbaran (Agusan) Inc. from doing business in
the Philippines.

The BSP is looking at consolidating the
Strengthening Program for Rural Banks (SPRB)
Plus and the Consolidation Program for Rural
Banks (CPRB) to entice mergers among smaller
banks with the entry of stronger foreign banks
into the country.

Business ( Article MRec ), pagematch: 1,
sectionmatch: 1

Based on the latest report of the BSP, the
number of banks operating in the Philippines
reached 622 in end March this year, down from
646 in the same month of 2015.

The number of big banks or universal and
commercial banks increased to 41 as of the end
of March from 36 a year earlier with the entry
of new foreign banks following the passage of RA
10641.

On the other hand, the number of thrift banks
declined to 66 in end March from from 69 a year
ago while the number of rural and cooperative
banks decreased to 515 from 541.

Cantilan Bank has been named as the
country’s No. 1 Most Outstanding Countryside
Financial Institution and Best CFI Availer for
Agri-Agra Loans during the 18th edition of Gawad
CFI by the Land Bank of the Philippines
(Landbank), a government financial institution
focusing on serving the needs of rural
communities.

“We are one with Landbank in helping develop and
sustain the livelihood of the people in the
countryside. These awards will help us further
our endeavor to deliver the best financial
services to the communities that we serve,” said
CBI Chairman Lt. Gen. William K. Hotchkiss III
(Ret.) who received the awards during the Gawad
CFI Awarding Ceremonies held at the DM Hall,
Landbank Plaza on August 10, 2016.

“We are thankful that our financial inclusion
efforts in the countryside have been recognized
by Landbank for six consecutive years now,” he
added.

Gawad CFI is an annual awarding ceremony of
Landbank which gives recognition to the efforts
of outstanding financial institutions who have
made a valuable impact in countryside
development, benefiting more farmers,
fisherfolk, and small-medium enterprises.

Recently, Cantilan Bank also bagged an award
from the Small Business Corporation as Most
Distinguished Partner in Credit Guarantee.ntice
mergers among smaller banks with the entry of
stronger foreign banks into the country.

14TH BANK CLOSED. Rural Bank of Alabat is
the 14th financial institution closed by the
central bank this year. Photo from
www.pdic.gov.ph

MANILA, Philippines – A total of 14 banks in the
Philippines have been shut down in the first
half of 2016, as the Bangko Sentral ng Pilipinas
(BSP) steps up its campaign against weak
players.

The latest to be closed is the Rural Bank of
Alabat (Quezon), which has been prohibited from
doing business in the country and placed under
the supervision of the state-run Philippine
Deposit Insurance Corporation (PDIC).

The Rural Bank of Alabat is a 3-unit rural bank,
with its head office located in Alabat, Quezon.
(READ: Fewer Philippine banks in 2015)

Latest available records showed that the closed
rural bank had 15,359 accounts, with total
deposit liabilities of P121 million.

Total insured deposits under the Rural Bank of
Alabat amounted to P111.5 million, involving
99.8% of total deposit accounts.

The Rural Bank of Alabat is the 14th bank closed
by the BSP this year, matching the number of
banks shuttered by the bank regulator in 2015.

Closure of more banks

The country's central bank said it expects the
closure of more banks.

The Rural Bank of Alabat is the 3rd bank to be
ordered closed by the BSP following the
effectivity of Republic Act No. 10846 that
amended the PDIC Charter.

But the number of big banks or universal and
commercial banks went up to 41 from 36 with the
entry of more foreign players after former
president Benigno Aquino III signed Republic Act
No. 10641 in July last year.

The number of thrift banks reached 66 in
end-March this year from 69 in end-March last
year, while the number of rural and cooperative
banks decreased to 515 from 541. (READ: Bank of
Tokyo Mitsubishi acquires 20% stake in Security
Bank)

The BSP is consolidating the Strengthening
Program for Rural Banks (SPRB) Plus and the
Consolidated Program for Rural Banks (CPRB) to
entice mergers among smaller banks with the
entry of stronger foreign banks into the
country. – Rappler.com

Rural Bank of Cabadbaran, whose head office was
located in Cabadbaran City, the capital of
Agusan del Norte, had three other offices: one
branch each in the cities of Butuan and Cagayan
de Oro as well as a microbanking office in
Gingoog City.

Likewise placed by the Monetary Board under the
PDIC's receivership also on July 28 was Rural
Bank of Alabat (Quezon) Inc., whose head office
was located in Alabat, Quezon.

Rural Bank of Alabat had two branches in the
towns of Atimonan and Mauban in the same
provinces.

The PDIC took over the two banks' affairs,
assets, branches as well as records on July 29.

Including the thrift bank GSIS Family Bank,
which the Monetary Board shuttered in May, there
were 14 closed banks thus far in 2016.

But GSIS Family Bank may find a new lease of
life as "less than 10" firms have expressed
interest to rehabilitate the lender previously
controlled by state-run pension fund Government
Service Insurance System, according to the PDIC.

Rural Bank of Alabat and Rural Bank of
Cabadbaran were the second and third banks,
respectively, closed since Republic Act No.
10846, which amended the PDIC's charter, took
effect in June.

TRADE Secretary Ramon Lopez plans to push
for the establishment of a P1-billion regional
credit access for micro, small and medium sized
enterprises (MSMEs) to help address one of the
biggest hurdles faced by local firms.

This was one of the poverty-alleviation measures
proposed by President Duterte during his
campaign earlier this year.

“I will have to ask the President about that.
That will benefit the MSMEs and so hopefully, we
can get that support from the President and
reflect that immediately in the next budget,”
Lopez said in an interview with the Inquirer.

According to Lopez, the additional amount would
also help fund more shared services facilities
(SSF), a flagship program of the Department of
Trade and Industry that provides MSMEs with
equipment or infrastructure that can be used by
a number of beneficiaries such as cooperatives,
institutions and communities.

A portion of the fund can also be used for the
Negosyo Centers for productivity enhancement
programs and for further training, seminars and
mentoring activities.

“This [additional credit] only means that we
will be able to do more. This is exciting for us
because in teaching the nation how to fish, we
will be able to feed the nation many lifetimes.
This is the mantra that we are following. What
we want is to empower our MSMEs,” Lopez
explained.

During the campaign, the Duterte camp promised
that MSMEs would be able to borrow capital from
the government to expand their business.
Currently, small businessmen have nobody to turn
to but loan sharks while rich businessmen could
get capital from their family, bank or by
selling their properties.

PDIC president Cristina Que Orbeta said Republic
Act 10846 that amended its charter provides
payment of deposit insurance would now be based
on depositors’ records and not just solely on
the basis of records maintained by the closed
bank.

Orbeta said this addresses the inconvenience
caused to depositors by the absence of deposit
records of closed banks or by irregularities in
the recording, documentation and deposit
record-keeping of a closed bank.

She stressed the need for depositors to always
secure their deposit records and keep their
information updated with their banks.

The PDIC reported there had been several
instances when the records of closed banks were
found to be in a state of disarray upon PDIC’s
takeover. In situations like these, payout
operations encountered delays due to the need to
examine carefully deposit records of the bank
causing undue inconvenience to depositors.

The new law also allows gross settlement of
deposit insurance claims, except in instances
when depositors have past due loans and when
their deposits are under hold-out agreements
with the bank.

This means loans that are current would no
longer be deducted from the amount of deposit
insurance to be paid by PDIC to the depositors
of closed banks, enabling the borrowers to
benefit from the payment period agreed with the
bank.

“This will expedite the payment of deposit
insurance claims and quicker access to their
trapped funds. Borrowers are, however, reminded
of their responsibility to continue to pay their
loans. PDIC, as liquidator, will continue to
collect loans owed to the bank,” Orbeta said.

The new law empowers PDIC to further strengthen
depositor protection, minimize disruption in the
financial system in times of bank closures,
promote financial inclusion through continued
access to banking services, strengthen PDIC as
an organization; and ensure PDIC policies are
aligned with international best practices.

The BSP has so far ordered the closure of 11
banks consisting of 10 rural banks and one
thrift bank this year.

The BSP is looking at consolidating the
Strengthening Program for Rural Banks (SPRB)
Plus and the Comprehensive Program for Rural
Banks (CPRB) to entice mergers among smaller
banks with the entry of stronger foreign banks
into the country.

Latest data from the BSP showed the number of
banks operating in the Philippines decline to
622 in end-March this year from 646 in end March
last year amid the continued consolidation of
banks as well as the exit of weaker players
particularly rural banks.

The number of big banks or universal and
commercial banks went up to 41 in end March this
year from 36 in end March last year with the
entry of new foreign banks.

These comprised of 21 universal banks consisting
of 12 private domestic banks, three government
banks, and six foreign bank branches as well as
20 commercial banks comprised of five private
domestic banks, two foreign bank subsidiaries,
and 13 foreign bank branches.

The BSP said the number of thrift banks reached
66 in end March this year from 69 in end March
last year while the number of rural and
cooperative banks decreased to 515 in end from
541.

BSP orders
rural bank closedMANILA -- A single unit Negros
Occidental-based rural bank has been ordered
closed by the Bangko Sentral ng Pilipinas due to
high-level of deposit liabilities.

In a statement, the Philippine Deposit Insurance
Corporation said it will take over the New Rural
Bank of Binalbagan (Negros Occidental) after the
central bank's policy-making Monetary Board put
the bank under PDIC receivership on June 9,
2016.

Latest data show that the bank had 480 accounts
with total deposit liabilities of P8.24 million
as of end-March 2016.

PDIC said 98.24 million or 98.3 percent of the
deposits are insured.

With the takeover, PDIC will collate bank
records and verify these to be able to pay
depositors with valid accounts and with balances
of up to P100,000 and below as soon as possible,
except when they have outstanding obligations
with the banks.

Accounts holders with deposits higher than
P100,000, on the other hand, need to file
deposit insurance claims.

Account holders are given until June 16, 2016 to
update their addresses with the bank while
depositors who are required to file deposit
insurance claims may start the process by June
23, 2016.*PNA

The new division, he said, will do surveillance
and information dissemination across the
country. It will "go around and examine
institutions and verify and test the ability of
those institutions to manage cybersecurity,"
Espenilla noted.

"This one is for supervised entities under the
BSP. 'Yun ang kanilang main focus," he added.

Among the financial institutions under BSP
supervision are banks (universal, commercial,
thrift, rural, and cooperative) and other
non-bank firms such as pawnshops.

Espenilla said the BSP is currently looking at
options to regulate virtual currencies. "In our
case, we don't regulate but given the increasing
volume (of users), we are now that much closer
to formally regulating virtual currencies," he
said.

In the Philippines, Bitcoin transactions amount
$2 million to $3 million a month. It is the most
widely used virtual currency in the coutnry.

"It is not a small amount of transactions,"
Espenilla said.

The central bank is studying the possibility of
regulating virtual currencies to safeguard the
public from threats, he noted.

"We are looking at it for two important reasons:
aspects of money laundering, and consumer
protection concerns," he said, noted the public
has an important role in this as well.

"Our belief is that BSP cannot always be around
to protect the public. The public must, first
and foremost, learn to protect itself," he
added. – VDS, GMA News

State-run Philippine Deposit Insurance
Corp. (PDIC) said two groups involving a total
of 10 rural banks have applied for the
Consolidation Program for Rural Banks (CPRB).

CPRB is a bank strengthening program that aims
to bring about a stronger and less fragmented
banking system and provide opportunities to
enhance rural banks’ business prospects and
ability to face increased competition.

It is a tripartite program of the PDIC, Bangko
Sentral ng Pilipinas (BSP), and Land Bank of the
Philippines that was launched in August last
year to encourage consolidation among rural
banks to improve financial strength and enhance
their viability.

Rural banks that avail of CPRB will receive
assistance in financial advisory, business
process improvement, and capacity building.

LandBank may also provide equity participation,
while the BSP will observe full flexibility in
the grant of incentives to participating banks.

Proponent banks that form a group of at least
five rural banks with head offices or majority
of branches located within the same region or
area are eligible to avail of the CPRB.

A rural bank with head office in a nearby region
may also apply, provided that all program
objectives are met.

PDIC President Cristina Que Orbeta expressed
optimism that more rural banks will soon avail
of the CPRB and maximize its benefits for their
expansion and institutional strengthening.

“I trust that more banks will see CPRB as a
beneficial program for the whole rural banking
industry and will therefore take advantage of
this opportunity,” she said.

The PDIC assured the depositing public that
consolidation among banks will be beneficial to
the industry and will strengthen the banking
system.

While consolidation reduces the number of
operating banks, the CPRB ensures that the
remaining consolidated banks are financially
stronger with higher capital bases, and equipped
to provide improved services to depositors in
terms of upgraded facilities, expanded banking
products, and enhanced management and
governance.

The applications from these rural banks signify
their recognition of the advantages to be gained
from CPRB in improving their business
capabilities and diversifying their respective
markets, the PDIC said.

“Interested rural banks may visit the PDIC
website, www.pdic.gov.ph, to view the salient
features, implementing guidelines and
documentary requirements of the CPRB,” it added.

The Bangko Sentral ng Pilipinas (BSP) has
moved to allow lenders in areas affected by the
drought caused by the El Niño phenomenon to
provide debt relief to their borrowers by
granting regulatory and rediscounting relief
measures to banks and other financial
institutions.

“Due to severe drought conditions affecting
several provinces, borrowers in the affected
areas could face difficulty in paying their
loans,” the central bank said late Thursday.

These circumstances warrant BSP’s immediate
response through the grant of regulatory and
rediscounting relief measures to banks and
non-bank financial institutions with
quasi-banking functions (NBQBs) with head
offices or branches located in the areas which
have been or may be declared by the National
Disaster Risk Reduction Management Council or
the local government, upon the recommendation of
the Regional or Local Disaster Risk Reduction
Management Council as under a state of calamity,
the BSP said.

By providing regulatory relief, the BSP said
these financial institutions would be able to
provide debt relief to their borrowers.

Approved on May 13 by the Monetary Board, the
central bank said for thrift banks/rural
banks/cooperative banks and NBQBs, the temporary
relief measures were the exclusion of existing
loans of borrowers in affected areas from the
computation of past due ratios, provided these
are restructured or given relief; reducing the
5-percent general loan-loss provision to 1
percent for restructured loans of borrowers in
the affected areas; and non-imposition of
penalties on legal reserves deficiencies with
head office or branches in the affected areas.

The relief also include moratorium on monthly
payments due the BSP for banks with ongoing
rehabilitation programs; and subject to BSP
approval, booking of allowance for probable
losses on a staggeredbasis over maximum of five
years for all types of credit extended to
individual and businesses directly affected by
the phenomenon.

For all banks, the regulatory relief allows
banks to provide financial assistance to their
officers and employees who were affected by the
calamity, including assistance that may not be
within the scope of the existing BSP-approved
Fringe Benefit Program.

For all rediscounting banks, the relief includes
the granting of a 60-day grace period to settle
the outstanding rediscounting obligations as of
declaration date of a state of calamity with the
BSP; and allowing banks to restructure with the
BSP, on a case-to-case basis, the outstanding
rediscounted loans of borrowers affected by El
Niño.

“These measures will be in effect for a period
of one (1) year, reckoned from the date of
declaration of a state of calamity, and covered
by additional specific and other prudential
conditions,” the BSP concluded.

This was some P1.59 trillion or 20.71 percent
higher than total resources last year of only
P7.685 trillion.

The growth in resources was also faster than the
19.6-percent growth posted in July this year.
About P38.1 billion was added to the Philippine
banking system’s total resources from July to
August this year. The banks’ assets in July
stood at P9.24 trillion.

Universal and commercial banks, which comprise
about 72.3 percent of total bank resources in
the country, was the primary driver in the rise
in resources during the period. At end-August
this year, resources of universal and commercial
banks totaled P8.32 trillion, about 20.88
percent or P1.44 trillion higher than last year
when this totaled P6.89 trillion. This was also
about P35 billion higher than the P8.28 trillion
posted the previous month.

Thrift banks, which own around 6.6 percent of
the total resources of Philippine banks, also
posted double-digit growth in the first eight
months of the year. From the P609.8 billion seen
in January to August last year, thrift banks’
resources grew by about 25.25 percent, or about
P154 billion, to reach P763.8 billion in the
January to August this year. From July to
August, thrift bank resources grew larger by 3.1
billion from the P760.7 billion in July this
year.

The August data on the resources of rural banks
has not yet been made official available by the
BSP. The latest data for rural banks show assets
at P190.1 billion as of end-September last year.

The resources of non-banks as of August this
year is also not yet available. As of March this
year, total resources of non-bank financial
institutions stood at P2.231 trillion. These
brought the August total resources of the
Philippine financial system to P11.51 trillion,
about P1.716 trillion or 17.55 percent higher
from the same period last year.

Soured loans held by small domestic banks grew
by 10 percent in the first quarter amid
aggressive lending activities, based data
released by the central bank. In a statement,
the Bangko Sentral ng Pilipinas (BSP) said the
provisions of thrift, rural and cooperative
banks for these nonperforming loans (NPL) also
rose as they sought to cover possible losses
that might affect the welfare of their
depositors.

The combined nonperforming loans (NPLs) of
thrift, rural and cooperative banks represented
7.77 percent of their total loan portfolio of
P568.71 billion at the end of the first quarter
this year.

The BSP attributed the increase in the
industry’s NPL ratio this year from 7.61 percent
last year to the 10.3-percent year-on-year rise
in soured loans vis-à-vis the 8-percent increase
in loan portfolio in the same period.

The banks’ loan loss reserves for bad loans,
meanwhile, stood at 66.52 percent of NPLs in
March, up from the 64.60 percent a year ago.

“Provisioning for NPLs is a prudential measure
for mitigating potential credit losses,” the BSP
said.

The risk of small banks’ level of bad loans
undermining the health of the country’s
financial system was downplayed by the central
bank, saying that thrift banks made up only
10.47 percent of the total industry. Rural and
cooperative banks, meanwhile, were just 2.89
percent and 0.20 percent, respectively, of the
Philippine banking system’s total loan portfolio
in March this year.

NPLs of universal and commercial banks, which
dominate the country’s banking system, eased to
2.68 percent of their loan portfolio from 2.75
percent in March and 3.01 percent in June of
2012.

The BSP said local banks were able to resist the
temptation of relaxing their standards and lend
excessively to the public to increase profits.
It said bank lending standards remained high
despite the ample liquidity in the system.

The rise in NPLs was attributed to rural and
cooperative banks, which saw bad loans reach
13.26 percent and 14.22 percent of their
respective loan portfolios.

Thrift banks saw their NPLs ease to 6.13 percent
of their loan portfolio as of the end of March,
from 6.48 percent a year ago. This was matched
by a slight rise in the thrift banks’ loan loss
reserves to 70.43 in March from 69.64 percent a
year ago.

In a statement, AUB said its subsidiary Rural
Bank of Angeles is acquiring the banking
business of the Cooperative Bank of Pampanga
(CBP).

CBP has 204 member cooperatives in various
locations, including Pampanga, Cabanatuan and
Davao. As of end-2012, it had total assets of
P290.8 million and has seven branches -- San
Fernando, Apalit, Sta. Ana, Angeles,
Floridablanca, Lubao and Mabalacat.

"CBP presents a unique opportunity and will
allow RBA to expand its presence and footprint
in Pampanga... With the resources and
integration experience of RBA and its parent,
AUB, we are confident of recapitalizing and
revitalizing the business of CBP," said bank
president Ronald Joseph Fernandez.

"While preparation for the completion of the
acquisition is ongoing, AUB is prepared to
advance additional new capital to CBP to ensure
the servicing of CBP's liabilities and its
stable and continued operation," he added.

Since AUB acquired Angeles City-based RBA in
July 2009, the rural bank has already returned
to profitability and currently has 11 branches
and other banking offices in Pampanga and
Tarlac. RBA now has total assets of Php416.1
million and a net income of Php10.9 million as
of December 31,2012.The acquisitions of CBP and
RBA, in addition to Asiatrust Develop.

In a text message on Monday, BSP Deputy Governor
Diwa C. Guinigundo explained that the move will
“remove the P20-billion budget that the central
bank has set aside for the peso rediscounting
facility… for universal and commercial banks.”

The rediscount facility is a refinancing window
from which banks borrow money using promissory
notes and other loan papers of its borrowers as
collateral, according to the central bank.

The central bank announced in August that it is
restructuring the peso rediscounting facility to
“align it further with the BSP’s market-based
monetary operations framework and with
international central banking practice of
scaling down directed credit operations… as it
remains committed to providing the appropriate
level of liquidity to the banking system to
ensure sustained funding for the country’s
growth requirements to the extent that the
inflation outlook will allow.”

BSP also said that by next month there will be
two separate rediscounting windows.
Rediscounting Window I will be for universal and
commercial banks, while Rediscounting Window II
will be for thrift, cooperative and rural banks.

With the absence of a ceiling, Mr. Guinigundo
said the amount banks can borrow from the
facility will depend on their capital, assets,
management, earnings, liquidity, and sensitivity
(CAMELS) rating, which measures a bank’s
financial health and ability to pay obligations.

“There is a scoring system based on the banks
net worth and compliance with CAMELS rating,” he
said.

Loan rates for universal and commercial banks
are pegged at BSP’s lending rate of 5.5%, while
that for thrift, rural and cooperative banks is
set at BSP’s 3.5% borrowing rate. As of
September, banks had availed of P17.32 billion
in loans from BSP’s rediscount facility, lower
than the P32.761 billion recorded in the same
period last year. -- A. R. R. Gregorio

Kim announces changes to align staff,
finances and priorities to meet strategic goalsWASHINGTON, October 11, 2013—World Bank
Group President Jim Yong Kim today announced a
set of sweeping changes to align the staff,
finances, and priorities of the global
institution to meet the twin goals of ending
extreme poverty by 2030 and boosting shared
prosperity for the bottom 40 percent of the
population in developing countries.

Addressing representatives of the Bank Group’s
188 member countries at the plenary of the World
Bank/International Monetary Fund Annual
Meetings, Kim noted that for too long, the
organization had not followed its own advice and
had avoided tough choices.

“That’s changing. We are taking our own
medicine. We will show much more financial
discipline than we have in the past in order to
become more efficient and identify new ways to
reduce spending. Just as we tell finance
ministers, we also need to plan for the longer
term, shoring up our revenue base, seeking ways
to save, and building a stronger foundation for
years to come,” said Kim.

Kim praised the hard work of Bank Group staff
and said he wanted to create a structure that
brings out the best of their talents and
expertise.

“We can’t revert to business as usual. When I
started my tenure at the World Bank Group some
16 months ago, I discovered a staff with a
tremendous depth of knowledge and experience. I
also found a staff frustrated with the
institution. Many wanted their work to have
greater impact. They chafed at a bureaucracy
that had turned our six regional units into
silos, with each one reluctant to share its
technical expertise with the others.”

Over the next three years, the World Bank will
find at least a $400 million reduction in annual
administrative costs, said Kim. These savings
will directly benefit clients, as the
organization will work to reinvest these
resources toward new financing.
Kim noted that in addition to savings, the Bank
Group needed to reform the way it designs its
budget, to align budgets with strategy, to
selectively invest in the future, and to
aggressively explore new ways to grow revenue to
better serve our clients.

“If we have high aspirations for the poor, if
our work is to be aligned with our goals, we
must be as efficient and focused as possible,”
said Kim.

Kim illustrated the importance of ending extreme
poverty with a recent World Bank report which
found that of those in poverty, one in three is
a child.

“For all the people living in extreme poverty,
400 million are children. What more motivation
do we need to accelerate progress toward the
goal of ending extreme poverty by 2030? How can
we in good conscience not do all we can to lift
400 million children, their families, and
hundreds of millions of others out of poverty
and into a life of opportunity?’’
To make the poverty goal more urgent, Kim hailed
the Bank’s new interim goal of cutting extreme
poverty roughly in half by 2020, from its rate
of 18 percent in 2010 to 9 percent in 2020. “If
we are going to be on the path of reaching 3
percent of population living in extreme poverty
by 2030, we must get to 9 percent by 2020,” said
Kim.

In addition, Kim announced a new initiative to
provide universal financial access to all
working-age adults by 2020.
“Globally, 2.5 billion adults have no mechanisms
to save money, let alone pay bills through a
transactional account or through a mobile phone.
We believe we can chart a path toward universal
financial access by bringing together multiple
approaches and technologies. This is exactly the
type of ambitious project that can help lift
many people, especially women, out of poverty.”

Kim called for a new approach to measuring
whether Bank-financed projects are successful
and said he was creating a “Presidential
Delivery Unit” to focus on the Bank Group’s
performance as an institution and to share data
and lessons across the institution and with the
rest of the world.

Kim described three aspects of the Bank Group’s
work in which the new delivery unit will measure
outcomes:
• “First, we know we must decrease
administrative barriers. We promise to reduce
transaction times by a third from conception of
a project to first disbursement of funds.

• Second, we must become a better listener. Last
year, we had beneficiary feedback on 34 percent
of our projects. We promise that for our
projects with clear beneficiaries, we will get
feedback – from every single one of them, 100
percent.

• Third, we know that our partners and clients
need to know where we work in order to better
coordinate all of our collective resources. We
promise to add rich details to our maps so that
anyone will be able to go online, click on maps,
and immediately learn where we are working and
what we are doing.”

Kim told assembled member countries that the
Bank was recommitting itself to work in fragile
and conflict-affected states, with significant
increases in financing in the next three years.
However, Kim noted that having transformational
impact in these fragile states depended upon
donor support for the International Development
Association (IDA), the World Bank’s fund for the
poorest, which is seeking a replenishment of
resources in 2013.

“We need a strong IDA replenishment this year.
It will help create more jobs, increase
educational opportunities for girls, and address
climate change risks,” said Kim.

Kim concluded with a unifying call for the
international community to demonstrate its
commitment to the world’s poorest:
“Our purpose is clear, our voice unwavering. No
one should live in the abysmal conditions of
extreme poverty, living on a dollar or two a
day. Extreme poverty in our world is morally
reprehensible, and more painful to witness with
each passing day. We must urgently lift a
billion people from extreme poverty, help them
to regain dignity, help them find hope, and help
them change their own lives -- and the whole
world’s future -- for the better.”

The central bank has approved the merger of six
small banks into one stronger bank that would
have a branch network in Luzon, Visayas and
Mindanao.

In a statement, the Bangko Sentral ng Pilipinas
(BSP) said the consolidation of six cooperative
banks was approved under the regulator’s
Strengthening Program for Cooperative Banks
(SPCB), which extends incentives to merging
banks.

In addition, the National Confederation of
Cooperatives said it would infuse fresh capital
into the merged bank, which would be named
Network Consolidated Cooperative Bank (NCCB).

“This major event heralds the acceleration of
the consolidation of the cooperative banking
industry, aimed at contributing further to the
health and soundness of the entire banking
system,” the BSP said in a statement.

“Ultimately, this should redound to the benefit
of the various stakeholders, including the
public,” the regulator said.
The SPCB is an incentive program conceptualized
by the BSP, Philippine Deposit Insurance Corp.
(PDIC) and Land Bank of the Philippines. The
program seeks to encourage mergers and
acquisitions in the industry to strengthen the
cooperative banking sector.

Incentives include leeway on certain regulations
and financial assistance for eligible banks.

“This program is in recognition of the
cooperative banks’ role in providing essential
financial services in the economy, particularly
in providing adequate banking services in local
communities and in supporting growth of rural
economies,” the BSP said.—Paolo G.
Montecillo

MANILA, Philippines - Treasury bill (T-bill)
rates declined to their lowest level yesterday
as investors took sanctuary in government
securities amid deepening uncertainties in the
US as well as excess liquidity in the domestic
market.
The government raised a total of P20 billion
with investors offering a total of P108.66
billion.

The 91-day T-bill yield tumbled to an all-time
low of .001 percent, almost reaching zero
percent as investors swamped yesterday’s
auction. This was a significant decline from the
.866 percent set in the previous auction.

Tenders for the the three-month bills reached
P38.59 billion or more than nine times the P4
billion on offer.

The interest rate on the 182-day paper plunged
83 basis points to an average of .09 percent.
Bids for the six-month bills amounted to P35.46
billion or nearly six times the P6 billion
available.

The yield on the the 365-day papers declined by
76.5 basis points to .955. The government
accepted P10 billion out of the P34.61 billion
worth of bids received.

Deputy Treasury Eduardo Mendiola attributed the
overwhelming demand to the crisis hounding the
US government now. “Markets are shifting to
short-term instruments and selling longer tenor
securities partly due to what’s happening in the
US,” he said.

Mendiola said the upgrade by Moody’s of the
Philippines’ credit rating to investment grade
has also buoyed market sentiment.

He, nevertheless, believes that the US will
bounce back and fix its house in order. “The US
is a big economy and democracy is working well.
Don’t think the US will allow itself to default
on its debt,” Mendiola said.

Despite enormous liquidity in the financial
system, the government is sticking to its P120
billion borrowing program for the fourth quarter
this year. The borrowing is composed of P40
billion worth of T-bills and P80 billion worth
of T-bond.

The Treasury will offer P20 billion worth of
20-year retail treasury bonds (RTBs) in October,
P30 billion worth of 7-year RTBs in November,
and another P30 billion worth of RTBs in
December.

Shelter is one of the basic requirements of
human needs. For an ordinary Filipino, owning a
house provides a sense of economic security and
dignity in the society. In the rural areas,
particularly agricultural workers, low-income
earners and even some families of Overseas
Filipino Workers, owning a house would give them
some sort of ‘pride’ seeing their little
hard-earned money invested in something that
appreciates in value over time.

However, it is a given fact that owning a house
is costly. An average house of about 100 sq. m.
goes for a total contract price of around P5
million, including land. Apart from owning, even
some home improvements would also involve
certain expenses. Several contractors might
quote P20,000 per sq. m. to include labor and
materials from plan to turnover of a house. An
average house would cost around P12,000 per sq.
m. using materials of lesser quality.

With this scenario, a typical Filipino residing
in a rural area and earns a little might
perceive the opportunity of owning or improving
a home bleak. This is where housing loans step
in.

While bigger banks offer concrete housing loans,
not all low-income earners can access these
services as they were often for people who
already have a steady source of income. Rural
banks, on the other hand, extend housing
microfinance that offers small, incremental
loans that fit with the way poor people build or
improve houses, progressively over time. This
emanated from the Bangko Sentral ng Pilipinas
(BSP) Circular 678 or the Micro-Housing Loan.

Apart from the support rural banks receive from
the regulators, government-controlled
corporations such as Home Guaranty Corporation
(HGC) made it possible for an improved housing
loan system for underprivileged Filipinos,
giving them more opportunities to finance their
own homes. The HGC, which is under the
supervision of the Housing and Urban Development
Coordinating Council (HUDCC) and chaired by Vice
President Jejomar C. Binay, supports
homeownership among Filipinos by uplifting
financial institutions to lend to individual
homebuyers and housing developers.

The HGC, through its two latest programs – the
Guaranty Program to the Countryside through
Rural Banks and the Guaranty Program for
Microfinance and Small Loans for Home
Improvement – extends guaranty lines to
financial institutions and secures investments
for home-lending programs with the goal of
encouraging financial institutions (such as
rural banks) to lend more for housing.

Under HGC Guaranty Programs, the government
guarantees the payment of HGC’s obligations. The
same is likewise beneficial for both the banks
and the borrowers as the latter could avail up
to 90% of the appraisal value of collateral
property while the former are exempted from the
BSP capital reserve requirement for HGC
guaranteed loans. It also freed-up banks from
administrative burden if a loan evades.

The expansion of HGC guaranty programs to the
countryside is an ongoing initiative that
started in 2011. Orientations and briefings
about the HGC guaranty were conducted to rural
banks in different parts of the country. By the
end of 2012, HGC was able to reach 237 rural
banks form 15 provincial federations in 9
regions, namely: National Capital Region,
Regions I-IVA, Region V, Regions VII-VIII and
Region XIII.

From this extensive marketing campaign, rural
bank clients increased from two in 2011 in 12 in
2012 and 18 in 2013. Seven of these rural banks
are actively enrolling, while the rest are in
the process of consolidating their accounts for
enrollment.
Recently, HGC and the Rural Bankers Association
of the Philippines (RBAP) had a Partnership
Ceremony held last September 26 at the Coconut
Palace in Roxas Boulevard, Manila. Certificate
of Partnerships were awarded to 17 partner rural
banks, which include: 1st Macro Bank, AMA Rural
Bank, Banco Alabang, Bank of Makati, Cantilan
Bank, Inc., Lipa Rural Bank, Inc., Mount Carmel
Rural Bank, Inc., Rang-ay Bank, Rural Bank of
Cauayan, Rural Bank of Guinobatan, Rural Bank of
Mabitac (Laguna), Inc., Rural Bank of Pagbilao,
Rural bank of Porac (Pampanga), Inc., Rural Bank
of Rosario (La Union), Rural Bank of San Jose
(Camarines Sur), Inc., Rural Bank of Tanza
(Cavite), Inc., and Zambales Rural Bank.

From hence, rural banks may grant a housing loan
system with a more adequate and appropriate risk
management measure in which, people among rural
communities can conveniently access without
taking financial risk on their part.

Dear Mr. Almario:
This refers to your letter dated July 23, 2013
as endorsed by Hon. Cesar Purisima and received
by our office on August 13, 2013 regarding your
request that the cost of all unused existing
official receipts duly printed in accordance
with BIR regulations and secured with proper
Authority To Print be expensed in monthly
installments commensurate to the monthly usage
of the new official receipts.

If the printing cost of these unused official
receipts were already taken up as expense in
your previous financial statements, granting
your request will result to double claim of
deductions. However, if these costs were taken
up initially as part of current assets, then
your request is taken favorably.

Please be informed of RMC No. 54-2013 whereby
all Principal and Supplementary
Receipts/Invoices with ATP dated January 1, 2011
to January 17, 2013 may be used until October
31, 2013 provided that new ATP was issued on or
before August 30, 2013. However, application for
new ATP filed after April 30, 2013 is deemed to
have been filed out of time and subject to a
penalty of One Thousand Pesos (P1,000) pursuant
to Section 264 of the Tax Code, as amended.

For your information.
Very truly yours,
(Sgd) NELSON M. ASPE
Deputy Commissioner
To download a copy of this letter, please click
on this link:
BIR Reply Re:
Official Receipts

The PLDT SME-Nation, in partnership with Go
Negosyo, once again seeks to recognize the
country’s leading entrepreneurs in this year’s
search for the new Champions of Filipino Values
in Business.

They are looking for fine Filipinos who
continuously work hard by tapping skill, talent
and technology in order to succeed in their
respective business ventures. The contest is
open to owners of Small and Medium Enterprises
and homegrown Filipino businesses that have been
in operation for at least 5 years.

If your “Bossing” is an inspiration to others,
if his/her business exemplifies exceptional
creativity and perseverance, then make his/her
story part of SME history. Nominate him/her by
filling out the nomination form, which can be
downloaded here:
MVP Bossing Awards
Nomination form

Together with the nomination form, kindly
attached the following documents:
1. DTI Business Permit/SEC Registration
(photocopy of the cover page only)
2. Proof of current PLDT Business Subscription
(ex. billing statement for one month of one
account)
3. Essay answering the questions above.

Philippines
Achieves Investment Grade Credit Rating with
Positive Outlook from Moody’s
Manila, 3 October 2013 – The Philippines today
achieved an investment grade rating from
international credit rating agency Moody’s
Investor Service. In a statement released by the
agency, the sovereign rating of the Government
of the Philippines was upgraded from ‘Ba1’ to
‘Baa3’ with a positive outlook. This upgrade by
Moody’s follows the Philippine sovereign’s
investment grade rating from Fitch in March and
from Standard and Poor’s (S&P) in May. Both
Fitch and S&P assign a stable outlook to the
Philippines’ investment grade rating.

Receiving news of the announcement, Governor
Amando M. Tetangco, Jr. of the Bangko Sentral ng
Pilipinas (BSP) thanks the credit rating agency
for the upgrade. “The BSP is pleased that
Moody's has recognized the country's strong
prospects and potentials as evident in the
investment grade rating and positive outlook
that it assigned to the Philippines. This is an
affirmation of the steady and responsible
macroeconomic stewardship and purposeful
structural reform agenda of the Philippines.”

The Governor continues, “Clearly, Moody's has
acknowledged the strong upside potentials and
the constructive dynamics of the economy that
should enable it to ride out the volatilities in
global financial markets.”
He adds “This development should bode well for
more investments, both local and foreign, in the
country. Greater investments should strengthen
the base for sustained and inclusive economic
growth and usher in a transformative period for
the Philippine economy.”

Reiterating the commitment to focus on
macroeconomic stability, the Governor concludes,
“The BSP shall continue to be attentive to
challenges and risks in the operating
environment. We will continue to ensure that the
economy's resilience and flexibility are
safeguarded through prudent monetary and
financial policies.”
In its rationale, Moody’s cited the following
key drivers for the upgrade: robust economic
performance; ongoing fiscal and debt
consolidation; and political stability and
improved governance. In addition to the 7.6% GDP
expansion in the first half of 2013, Moody’s
highlighted the stability of the Philippines'
funding conditions in the face of recent market
volatility in emerging markets as evidence of
the country’s resilience to external factors.
Also cited were the low and stable inflation
levels as well as the liquidity of the banking
system—the only system worldwide deemed by
Moody's to have a positive outlook. The credit
agency also highlighted the Aquino
Administration’s popularity and success in
institutionalizing its reform agenda. The
positive outlook comes off the back of
expectations of continued economic
outperformance of the Philippines as compared to
its peers in the region as well its continued
prospects for reform in the second half of
President Aquino’s term in office.

The Philippine Government acknowledges the
support of its credit ratings advisors from
Goldman Sachs’ Credit Risk Management and
Advisory Group, in particular Jacob Young
(Executive Director), Francisco Mejia (Executive
Director), and Aaron Collett (Analyst).

The Rural Bankers Association of the Philippines
(RBAP) congratulates the nine rural banks
recently awarded by the Land Bank of the
Philippines (LBP) as an ‘outstanding partner
countryside financial institution (CFIs).’
On its 15th year, the LBP recognize CFIs serving
as models of excellence in rural financial
services and in promoting inclusive growth to
improve the economy.

The LBP also gave citations and a cash prize of
P75T to the most outstanding rural banks in
three political regions: Rang-ay Bank, Inc. (A
Rural Bank) from Region 1; Bangko Kabayan (A
Rural Bank), Inc. from Region 4-A; and, Rural
Bank of Digos, Inc. from Region 11.

Special awards and cash prizes of P100T each
were also given to the following CFls: Rang-ay
Bank, Inc. as Best CFI Intermediary (with lowest
pass-on rate to end borrowers); Rural Bank of
Cauayan, Inc. as Best CFI Availer – Agri/Agra
Loans; Rural Bank of Goa, Inc. as Best CFI
Availer – Microfinance Loans and Gateway Rural
Bank, Inc. as Best CFI Availer – All Loans.

For the meantime, rural bankers who are willing
to advertise in any of the souvenir material for
the upcoming symposium are advised to contact
Ms. Shalie Y. Recaido, Administrative Officer
for particulars at (02) 527-2972 or (02)
527-2968 or through email at:
recaidoshalie@yahoo.com.

The RBAP Secretariat will provide updates here
as soon as any additional information becomes
available.

MVSM is a merger between Marikina Valley Rural
Bank and Bank of San Mateo. Both banks are
pioneer banks in their respective towns and were
the only banks to service the banking needs of
the people of Marikina and San Mateo, Rizal for
decades.

Today, its client base has grown to over 25,000,
delivering deposit and loan products to the
different towns in Rizal, Pasig and Marikina.
The bank is also an accredited agent for both
Bayad Center and Western Union.

MVSM has recently partnered with Habitat for
Humanity in providing deposit products for the
people in Marikina.
Check out their website at
www.mvsmbank.com

The Rural Bankers Association of the Philippines
(RBAP) congratulates One Network Bank, Inc. and
the Rural Bank of Sagay for bagging the Social
Security System’s (SSS) Balikat ng Bayan Award
last September 9.

The award was given in celebration of the SSS’
56th Anniversary and in recognition of the
invaluable role of employers, banks and the
media as SSS partners in advancing security
protection of Filipino workers. The awardees set
the standards of quality service for the benefit
of millions of SSS members.

This year, both the One Network Bank, Inc. and
the Rural Bank of Sagay were awarded Best Rural
Banks by the SSS.
Apart from One Network Bank, Inc. and the Rural
bank of Sagay, ten (10) other awardees are:
iRemit, Inc (Best Collecting Partner for OFW
Remittances from 2010-2012), Jollibee Food
Corporation and the Notre Dame of Cotabato, Inc.
(Top employers in the large and small/medium
Categories), Banco De Oro Unibank (Best
Commercial Bank), Planters Development Bank
(Best Thrift Bank), Ventaja International
Corporation (2013 Best Collecting Partner), the
Land Bank of the Philippines, First Consolidated
Bank, the Manila Bulletin and Aksyon Solusyon of
Radyo Singko.

The Balikat ng Bayan plaques were specially made
by Filipino sculptor Dr. Antonino Raymundo and
presented to the winners by SSS President and
Chief Executive Officer Emilio de Quiros, Jr.,
Chairman Juan Santos and Executive Vice
President Edgar Solilapsi.umanity in providing
deposit products for the people in Marikina.
Check out their website at
www.mvsmbank.com

Unknown to many, the town name “Mangaldan” has
different stories of origin. However, according
to a Dominican Priest Fr. Raymundo Suarez, OP,
in his manuscript, “Apuntes Cureosos de
Pangasinan,” the word “Mangaldan” was derived
from the root word “Alar” or “Alad,” which means
a fence made of bamboo or of any similar
material. Despite the presence of bamboo fences
all over the town, Mangaldan’s primary economic
resources include farming, livestock, poultry
and fish. Its inhabitants, approximately 92,000,
were known to be peace loving, intelligent and
generous people.

It is in this first-class soil did the Rural
Bank of Mangaldan laid its foundation. It was
through the initiative of Drs. Ricardo C.
Villamil and Vicente Jimenez that this bank was
born. Reluctant to pursue banking due to lack of
experience and background, Dr. Jimenez was later
on convinced by Dr. Villamil to start to what
will later become an outstanding financial
institution of Mangaldan and nearby towns.

Rural Bank of Mangaldan prioritize their clients
by offering a variety of deposit and lending
services to meet the demands of the community.
Among which are savings, time certificate of
deposits and demand deposits. For lending, they
offer agricultural loans, agrarian reform loans,
commercial loans, industrial loans, short,
medium and long-term loans, micro finance loans
and money shop loans.

Apart from delivering the usual banking
services, the Rural Bank of Mangaldan has never
neglected its corporate social responsibility.
Believing that education is the key to escape
from the clutches of poverty, the bank sends
poor but deserving students to pursue their
studies. The bank also has programs geared
towards environmental protection by engaging
students from Talogtog Elementary School and
Gueguesangen Elementary School in tree-planting
activities.
Due to its outstanding contribution in the
development of the countryside by being
responsive to the needs of the rural community,
Rural Bank of Mangaldan received numerous awards
during the years 1970 to 1987.

Among which are as follows:

Golden Plaque Award as “Rural Bank of the Year
1976.” Which was presented to Dr. Jimenez by
then box office movie queen Alma Moreno,
assisted by Modesto Francisco, special assistant
to the Central Bank Governor, and Manuel Santos
of the CB-DRBSLA, and witnessed by then
Secretary Arturo Tangco of the Department of
Agriculture;
Achievement Award as “Most Outstanding Rural
Bank of the Country for 1976-1977,” from the
Central Bank of the Philippines;

“Rural Bank of the Year 1976-77, from the
Samahang Bangko Rural ng Pangasinan”

“One of the Ten Best Managed Rural Banks in
Region I in 1983,” from the Central Bank of the
Philippines;
Rural Bank of Mangaldan prides itself as the No.
1 single taxpayer in Mangaldan and for taxable
year 2001, the No. 1 taxpayer in Pangasinan.

Since stability came hand-in-hand with the
quality of leadership, Dr. Vicente Jimenez has
turned over the stewardship of the bank to his
son, Mr. Alberto Jimenez, who is presently
serving as the Chairman of the Board, President
and General Manager. Like his father and
predecessor, the latter is equally competent in
continuing the legacy of the founder. He had
been the President of the Samahang Banko Rural
ng Pangasinan Foundation, Inc. in 2001-2003 and
President of the Confederation of Northern Luzon
Rural Banks in 2002-2003.

As the bank celebrates its golden anniversary of
service, advocacy and quality, clients can rely
on the touchstones the bank have since its
humble beginning to prove that rural banking
remains the finest partner in the countryside in
times of need. The bank holds itself as a fine
example of stewardship, which can be attested by
its 50 years of uplifting the lives of the
people of Mangaldan.

Over the years of brilliance in the industry,
the Rural Bank of Mangaldan now known as the
Bangko Rural ng Mangaldan was able to set a
standard in the industry not only in the town
but also in nearby areas and will continue to do
so in the years ahead as led by its new
management.

MANILA, Philippines – For the 15th consecutive
year, the Land Bank of the Philippines (LBP)
once more paid tribute to its outstanding
partner countryside financial institutions
(CFIs).

LBP president and chief executive officer Gilda
E. Pico said CFIs have unique strengths and
potentials that allow them to truly play a
distinct role in countryside development.

“This bounty of possibilities has inspired us
over the years to continuously expand support to
this sector,” Pico said, adding that the
conferment of awards brought with it total cash
prizes of P1.95 million.

Conferred with the Golden Award was the One
Network Bank Inc. (A Rural Bank) in Davao City,
which received a trophy and cash prize of
P500,000. The Golden Award is given to a former
Hall of Fame awardee which continued to support
small farmers and fisherfolk as evidenced by
their increasing number of small farmers and
fisherfolk assisted and loan portfolio to the
sector.

The Rural Bank of Goa Inc. from Camarines Sur
was named the most outstanding CFI in the
national category, followed by the Gateway Rural
Bank Inc. in Bulacan.

The Rural Bank of San Jose Inc. in Camarines Sur
bagged the third place while the Rural Bank of
Cauayan Inc. in Cauayan City and the Cantilan
Bank (A Rural Bank) Inc. in Surigao del Sur
landed in fourth and fifth places, respectively.

The first, second and third place winners in the
national level received P300,000, P200,000, and
P150,000, respectively while the fourth and
fifth place winners received P100,000 and
P75,000, respectively.

Special awards were also given to the Rang-ay
Bank as Best CFI Intermediary (with lowest
pass-on rate to end borrowers); Rural Bank of
Cauayan Inc. of Isabela as Best CFI Availer –
Agri/Agra Loans; Rural Bank of Goa as Best CFI
Availer – Microfinance Loans; and Gateway Rural
Bank as Best CFI Availer – All Loans.

In the first semester of 2013, LBP extended P9.8
billion in loans to CFIs, benefiting 165,478
farmers and fisherfolk nationwide.

Henry Sy-led China Banking Corp. (China Bank)
aims to strengthen its small- and
medium-enterprise (SME) lending business with
its acquisition of Planters Development Bank,
which was approved Wednesday.

In a disclosure to the local bourse, China Bank
said it was planning to take over the smaller
bank by acquiring as much as two-thirds of its
shares.

The deal combines the resources of Plantersbank,
the country’s leading bank for SMEs, with China
Bank, a 93-year old universal bank with a
“history of supporting entrepreneurs in the
country and a solid track record of financial
strength and stability,” China Bank said in a
statement.

Shares of China Bank were up by 4.35 percent on
Wednesday following the announcement. The
company’s stock outperformed the main index,
which closed 0.16 percent lower.

The Sy group also controls BDO Unibank, the
country’s biggest lender.

“The Plantersbank deal bolsters China Bank’s
current strategy in two areas—growing its middle
market/SME portfolio and its network expansion
program. China Bank is in the midst of the most
rapid expansion in its history,” the Sy-led bank
said.
From 148 branches in 2006 at the start of its
expansion program, it has a total network of 333
branches to date, complemented by 544 ATMs
nationwide. The group will now have a combined
network of at least 411 branches.

As of June 2013, China Bank had total assets of
P345.6 billion, gross loans of P189.9 billion,
and stockholders’ equity of P44.6 billion.

For the first semester of 2013, the bank posted
a 46-percent growth in consolidated profit to
P2.96 billion from P2.03 billion in the same
period last year, for a return on average equity
of 13.24 percent and a return on assets of 1.81
percent.
The China Bank Group includes China Bank, China
Bank Savings (CBS), Unity Bank, CBC Insurance
Brokers Inc., and Bancassurance affiliate
Manulife China Bank Life Assurance Corp.
(MCBLife).

The Investment & Capital Corp. of the
Philippines (ICCP) acted as the exclusive
financial adviser to Plantersbank for the
transaction.

Plantersbank, chaired by former Ambassador Jesus
Tambunting, has total assets of more than P52.7
billion as of May 2013, total loan portfolio of
P33 billion, deposits of P43.6 billion and
nationwide network of 78 branches.

Recently, the Bangko Sentral ng Pilipinas
reported that the personal remittances from
Overseas Filipino Workers (OFWs) grew from 6.4
percent to $13.9 billion for the first half of
2013, compared to the same period a year ago.
The sustained growth was still largely driven by
the land-based OFWs whose remittances comprised
of about threefourths (75.2 percent) of the
total.

With such money coming in, are there options
available for our “modern day heroes” and their
families here in our country to further grow
their funds? For instance, having too much money
can prove fatal especially if these are placed
in the “wrong hands” or even placed in an
investment asset where some might lack
substantial knowledge on the risks associated to
it. Thus, choosing the right investment
destination for the remittance money is as
equally important as keeping the overseas job
itself.

Aside from the usual investments in real estate
and in various business opportunities, the rural
banking industry represents a safe and viable
destination for the hard-earned money of OFWs.

Rural banks are in the best position to serve
the financial needs of OFWs and their families
as most of them reside in rural communities
where rural banks operate. It is not uncommon
for rural bank owners and staff to personally
know these people: they typically come from same
villages or barangays, and they almost shared
their childhood together. No other financial
institution can better provide a more personable
service than grassroots companies like rural
banks.

Rural banks likewise offer different financial
and non-financial products and services to OFWs
and their families. These include high-yield
medium/long-term time deposit, children’s
savings accounts, education and housing loans,
bills payment and collection services for
pension funds and government healthcare
services, as well as advisories on how to start
business ventures and undergo skills training in
partnership with different government agencies.
Most rural banks also provide counseling
services to OFW spouses on how to best take care
of their money. They become like a “financial
coach” to families, providing helpful tips on
how to become entrepreneurs and how to keep
their businesses profitable.

Remittances saved likewise help provide
employment opportunities since the law provides
that rural banks should invest their earnings
back to the rural communities where they
operate. All these opportunities help improve
the utilization and conversion of remittances
into productive investments and ventures in the
countryside, thus expanding the benefits derived
from foreign remittances.

In 2012, OFWs remitted more than $21 billion,
equivalent to 8.5 percent of the country’s gross
domestic product last year. Such a powerful
contributor to the economy deserves nothing less
than the utmost care and the best treatment only
rural banks can truly offer.

MANILA, Philippines - Another rural bank has
been shuttered by the Bangko Sentral ng
Pilipinas.

The Monetary Board has placed the Rural Bank of
Sto. Tomas (Davao del Norte), Inc. under the
receivership of the Philippine Deposit Insurance
Corporation (PDIC) last September 13.

The PDIC took over the bank on Monday (September
16).

Rural Bank of Sto. Tomas has three units -- the
head office located along R. Magsaysay Ave.,
Sto. Tomas, Davao del Norte, and two branches in
Asuncion and Braulio Dujali.

As of June 30, 2013, the bank had 8,023 accounts
with total deposit liabilities of P67.7 million.
Around 99.9% of the deposit accounts have
balances of P500,000 or less and fully covered
by deposit insurance. Total insured deposits
amounted to P58.2 million or 86.0% of the total
deposits.

PDIC said assured the bank's depositors that all
valid deposits shall be paid up to the maximum
deposit insurance coverage of P500,000.

The PDIC will conduct a Depositors-Borrowers
Forum on September 20, 2013 to inform depositors
of the requirements and procedures for filing
deposit insurance claims.

For more information, visit
www.pdic.gov.ph.
Concerned parties may also call the PDIC Toll
Free Hotline at 1-800-1-888-PDIC(7342), the PDIC
Public Assistance Hotlines at (02) 841-4630 to
(02) 841-4631, or send their e-mail to
pad@pdic.gov.ph.

LOCAL banks posted a decline in their availment
of the Bangko Sentral ng Pilipinas’s (BSP)
peso-rediscount window, an indication of ample
liquidity supply among banks, latest data from
the central bank show.

The BSP reported total loan availment of
commercial, thrift and rural banks amounting to
P16.41 billion in the first eight months. This
was 44.1 percent lower than the P29.35 billion
seen in the same period last year.

The central bank’s peso-rediscounting window
allows qualified banks to get loans or advances
from the BSP using eligible papers of its
borrowers as collateral. Through this facility,
the central bank advances the money the banks
have yet to collect from borrowers and
effectively speeds up the lending process.

According to BSP data, 81.7 percent of the total
amount rediscounted went to commercial credits,
7.7 percent to capital expenditures, 3 percent
to agricultural and industrial credits, 0.6
percent to permanent working capital, 0.1
percent to housing and 6.9 percent to other
credits.

Meanwhile, dollar-denominated rediscounting from
January to August this year under the Exporters
Dollar and Yen Rediscount Facility also
decreased by 28.6 percent.

Seven commercial banks and a thrift bank
exchanged their foreign currency receivables for
quick cash from the BSP worth $87.9 million as
of end-August this year, benefiting 30
exporters. This was lower compared to the $123.1
million granted in the same period last year. No
bank approached the Yen rediscounting window
since the start of the year, however.

For September, rates stood at 0.182 percent for
dollar rediscounting and about 0.116 percent for
the Japanese yen. The rates are based on the
London Interbank Offered Rate as of end-August
this year.

For the peso-rediscounting facility, interest
rates remained at 3.5 percent for all
maturities. This had been in place since October
last year. The BSP’s Monetary Board (MB) also
decided to maintain the same rate during its
rate-setting meeting in July. The MB will hold
its next policy meeting this Thursday.

Training Policies:
1. Reserve first with RBAP-RBRDFI your training
slot, and wait for RBAP-RBRDFI confirmation of
your reservation. Thereafter, you may deposit
the Registration Fees, book ticket (airline) and
secure accommodations. RBAP-RBRDFI will not be
responsible for any damage caused by unconfirmed
reservation (s).

Likewise, once training is FULL, RBAP-RBRDFI has
the right to refuse participation or
reimbursement on any damage brought by
unconfirmed reservations.

Deadline for submission of registration is not
later that Oct 11, 2013.

2. Reservation via telephone conversation is
accepted. However, Registration Form and fee
must be settled 10 days prior the seminar date
or Oct 07, 2013. Otherwise, reservation is
considered cancelled.

3. Cancellation Policy: – This will apply to
non-subsidized training fee.
a) 10 days prior the seminar date is entitled
for a full refund. *Regular Rate only
b) 3 days prior to the seminar date is entitled
for a half refund *Regular Rate only
c) Participants who have paid but failed to show
up for the seminar will only be entitled to a
rebate of 50% of the total registration fee.
(Regular Rate only)
d) For special cases (health, accident etc.),
kindly coordinate with RBRDFI staff for refund
procedures and requirements.

Course Outline
PART I: Salient Features of Republic Act 9646
A. Continuing Education Requirements under
D.A.O. No. 3 Series of 1999
B. Salient Features if the I.R.R. Of the RESA
9646
C. Overview of the Philippine Valuation
Standards (PVS)

1. Reserve first with RBAP-RBRDFI your training
slot, and wait for RBAP-RBRDFI confirmation of
your reservation. Thereafter, you may deposit
the Registration Fees, book ticket (airline) and
secure accommodations.

RBAP-RBRDFI will not be responsible for any
damage caused by unconfirmed reservation (s).

Likewise, once training is FULL, RBAP-RBRDFI has
the right to refuse participation or
reimbursement on any damage brought by
unconfirmed reservations.

Deadline for submission of registration is not
later that Oct. 11, 2013.

2. Reservation via telephone conversation is
accepted. However, Registration Form and fee
must be settled 10 days prior the seminar date
or Oct 07, 2013. Otherwise, reservation is
considered cancelled.

3. Cancellation Policy: - This will apply to
non-subsidized training fee.
a) 10 days prior the seminar date is entitled
for a full refund. *Regular Rate only

b) 3 days prior to the seminar date is entitled
for a half refund * Regular Rate only

c) Participants who have paid but failed to show
up for the seminar will only be entitled to a
rebate of 50% of the total registration fee.
(Regular Rate only)

Training Policies:
1. Reserve first with RBAP-RBRDFI your training
slot, and wait for RBAP-RBRDFI confirmation of
your reservation. Thereafter, you may deposit
the Registration Fees, book ticket (airline) and
secure accommodations. RBAP-RBRDFI will not be
responsible for any damage caused by unconfirmed
reservation (s).

Likewise, once training is FULL, RBAP-RBRDFI has
the right to refuse participation or
reimbursement on any damage brought by
unconfirmed reservations. Deadline for
submission of registration is not later that Oct
11, 2013.

2. Reservation via telephone conversation is
accepted. However, Registration Form and fee
must be settled 10 days prior the seminar date
or Oct 07, 2013. Otherwise, reservation is
considered cancelled.

3. Cancellation Policy: – This will apply to
non-subsidized training fee.
a) 10 days prior the seminar date is entitled
for a full refund. *Regular Rate only
b) 3 days prior to the seminar date is entitled
for a half refund * Regular Rate only
c) Participants who have paid but failed to show
up for the seminar will only be entitled to a
rebate of 50% of the total registration fee.
(Regular Rate only)
d) For special cases (health, accident etc.),
kindly coordinate with RBRDFI staff for refund
procedures and requirements.

PART I: Salient Features of Republic
Act 9646
A. Continuing Education Requirements under
D.A.O. No. 3 Series of 1999
B. Salient Features if the I.R.R. Of the RESA
9646
C. Overview of the Philippine Valuation
Standards (PVS)

Banks must
brace for new BSP regulations Published on Monday, 02 September 2013 19:49
Written by Genivi Factao

The Bangko Sentral ng Pilipinas (BSP) is fully
prepared to implement the fortified guidelines
contained under the Basel Core Principles (BCP)
whose tenets were raised from 25 to 29 BCPs.

This was learned from BSP Officer in Charge and
Director Lyn Javier who said the central bank
continues to endeavor to comply with the terms
of Basel 3 for more effective banking
supervision to better insulate the financial
system from overseas-borne and domestic
reverses.

Javier said the BCPs are essentially best
regulatory practice standards to which the local
regulator aspires as part of its supervisory
strategy and risk management goals.

BCP is comprised of essential criteria and
additional criteria, which are the best practice
standards.

Principles 1 to 13 cover power, responsibilities
and functions of supervisors. “These are the
must have of banking supervisor such as BSP,”
Javier explained.

“These are what the bank supervisors must
require their banks to have,” she added. The
common principles/standards for BCPs 14 to 29
include proportionality, concept of market
development and stress testing.

Proportionality means there is no
one-size-fits-all risk management system for
banks. The application of guidelines mindful of
the core principles vary from bank to bank
depending on size, risk profile and complexity.

The BSP, Javier said, is adopting the
proportionality principle in its risk- based
supervision.

“We’re not requiring rural banks to adopt
complicated and intricate systems as those of
commercial banks. [Regulatory] expectation
should be commensurate to the risk profile and
business models of bank,” she said.

Market development, on the other hand, is being
sensitive to the developments in the market.

She said it requires supervisors to compare one
bank to another or to have peer analysis to find
out the performance of one bank vis-à-vis
another given the circumstances in the economy.

Stress testing is also an important part of risk
management of bank’s forward-looking stress
testing framework to be able to asses if they
have enough capital to withstand the shock or
stress scenarios that could happen according to
Javier.
She took notice of Principle 16 and 24 on
capital adequacy and liquidity.

“We have yet to adopt the liquidity framework of
the Basel 3 framework, specifically the
liquidity coverage ratio or the net stable
funding ratio.

“It’s difficult to adopt this right away,
considering from our current regulatory regime.
We don’t have any liquidity threshold under
existing regulations. We only issued circular
545 on the expectation on liquidity risk
management,” she said.

BSP is conducting a continuing policy studies on
the propriety of setting liquidity threshold for
the domestic industry. Under the Basel 3
standards, you have the liquidity coverage ratio
or the short term ratio to measure whether a
bank could withstand a 30-day stress scenario,
Javier said.

Currently, other countries are contesting the
definition of the high quality level of liquid
assets.

MB approves
implementing rules on foreign equity infusion in
RBs Published on Monday, 02 September 2013 00:00
By A Web design Company

The Monetary Board (MB) has approved the
implementing rules of Republic Act No. 10574 or
“an Act Allowing the Infusion of Foreign Equity
in the Capital of Rural Banks” which allows
non-Filipino citizens to own up to 60 percent of
the voting stock of a domestic rural bank (RB).

Consistent with the provisions of the law, the
implementing rules contained in Bangko Sentral
ng Pilipinas (BSP) Circular 809 are aimed at
revitalizing the rural banking industry and
improving the access to banking services in the
country’s rural areas.

The implementing rules provide the general
guidelines for the entry of foreign banks,
non-bank corporations and individuals as
shareholders of RBs.

The fitness of prospective investors in RBs will
be assessed based on their strategic objectives,
reputation and integrity and effectiveness of
banking or business model.

Qualified foreign investors are allowed to pour
capital into several RBs to the extent
authorized by the MB.

Aside from foreign ownership of RBs, Circular
809 also sets the rules for the number of
independent directors for RBs, the membership of
elective or appointive official in the RB Board,
the foreclosure of lands used as RB loan
collateral, the valuation of government-held
shares in RBs and the computation of dividend
rates on RB shares held by government–owned or
-controlled financial institutions.

The MB has issued the implementing rules for RA
10574 after series of consultations with the
rural banking industry and key stakeholders.

The BSP is keen on strengthening the RB industry
as part of its efforts to promote financial
stability. RBs are also essential to enhancing
financial inclusion by boosting access to
financial services in the countryside. Financial
stability and inclusion are supportive of
sustained and balanced economic growth, which is
a key objective of the BSP.
The new law amends RA 7353, otherwise known as
the Rural Bank Act of 1992. It is also a
consolidation of House Bill 5360 Senate Bill
3282.

Rural Bankers Association of the Philippines
(RBAP) said the new law will help create an
environment conducive to economic growth in the
countryside.

“The passage of the Foreign Equity Bill into a
law is a major win not only for rural banks, but
to the countryside as well. Now that foreign
investments are allowed, rural banks are now in
a better financial position to reach out and
serve both the unbanked and under-banked through
improved banking services. We expect continuous
development in the countryside especially now
that rural banks are made even stronger and
sustainable,” said Atty. Edward Leandro Garcia,
former RBAP president, said.

Garcia said the measure would provide an
additional source of capital for rural banks,
placing them on a level playing field with
thrift and commercial banks.

With the law in place, he said RBAP could now
open its doors for talks on potential foreign
investor partnership.

Nestor Espenilla, deputy governor of the Bangko
Sentral ng Pilipinas (BSP) earlier said allowing
foreigners to own in part rural banks will also
mean improvements in their technological and
operational capacity.

“Allowing foreign equity will give rural banks
another option to increase capital. But more
important than the money is the know-how,”
Espenilla said.

Legislators, regulators and economists predict
that foreign investors’ entry into the local
rural banking industry will have a direct impact
on countryside development, as it will spur
economic activities in rural areas by creating
an environment that is beneficial to foreign
investors, local banking patrons, and national
economy.

A healthier and more competitive rural banking
sector, with the benefit of international
partnerships, will mean more resources to reach
out to the unbanked, underbanked, and the less
privileged sector of society, according to
Garcia.

“Our goal is to continue the role for which
rural banks where established and that is to
promote financial inclusion in the far flung
areas of the Philippines,” Garcia said.

He stressed that foreign equity in rural banks
will serve as a major stimulus for microfinance,
micro-enterprise, and agriculture sectors, and
all will serve as catalysts in countryside
development.

The legislation will put rural banks in equal
footing with all other banking categories, as it
will open a new source of equity infusion,
particularly for rural banks that are
hard-pressed to expand and cannot afford
sophisticated forms of financial services.

The Bangko Sentral ng Pilipinas (BSP) is
granting regulatory relief to banks whose
operations were affected by the recent flooding
in Luzon.

This follows recent inclement weather brought by
weather disturbances in the form of typhoon
“Labuyo,” which affected parts of Northern
Luzon, and the Southeast Monsoon made worse by
tropical storm “Maring,” which led to flooding
in Metro Manila and nearby provinces.

Under the list of relief measures approved by
the BSP last week for thrift, rural, and
cooperative banks are the exclusion of loans of
borrowers in affected areas in the computation
of soured loans, waiver of penalties for reserve
deficiencies of branches in affected areas, and
a moratorium on monthly payments to the BSP for
banks undergoing rehabilitation.

Subject to the approval of the BSP, small banks
would also be allowed to book probable losses
from loans of borrowers in affected areas on a
staggered basis over a maximum of five years.

The BSP said it would also waive penalties for
delays in the submission of supervisory reports.

MESSAGE
My warmest greetings to the Rural Banking
Association of the Philippines as you observed
the Rural Banking Week.

In the past three years of our administration,
we have witnessed a steady rise in our country’s
economic trajectory. Our newly instituted social
and fiscal reforms – supported by unprecedented
growth in GDP, upgrades from international
credit rating agencies, and heightened investor
and consumer confidence – have reestablished the
Philippines as the next Asian tiger. All of
these accomplishments are due in part to the
valuable contribution of our rural banking
industry. May you continue to be a driver of our
economy, by creating more investment and
livelihood opportunities for Filipinos in our
rural areas, empowering them to play greater
roles in revitalizing our nation.

The dynamic partnership of the public and
private sectors advances their respective
enterprises, and proves the Filipino people’s
commitment to inclusive, equitable progress. Let
us do our utmost to nourish our gains with the
revived culture of integrity, transparency, and
accountability, in pursuit of a brighter
tomorrow for our country.

As part of our commitment with the Bangko
Sentral ng Pilipinas (BSP), we would like to
remind you of the submission of deposit interest
rates for the Third Quarter of 2013.

The deadline for the submission of the Third
Quarter Deposit Interest Rates is on October 7,
2013 (Monday). Kindly see attached file for the
prescribed format.

To Federation and Confederation Presidents,
kindly remind your members to submit their data
on or before the set deadline of submission so
their data will be included in the consolidated
RBAP report that will be submitted to the BSP.
Please email your deposit interest rates at
info@rbap.org
or
michelle.rbap@gmail.com

Aside from floods and the resulting massive
traffic jams, another usual sighting during
these unfortunate times is families that found
their homes submerged in flood waters being
relocated to higher, dry grounds by barangay and
municipal officials. Here in the Philippines,
these high-ground and dry locations usually mean
empty basketball courts and barangay halls that
are converted to relocation sites. Meanwhile,
the usual parties subject to relocation efforts
when calamities occur are families in rural
communities, aside of course from the informal
settlers living in high-risk areas like close to
creeks and rivers in the metropolis.

What we hope to see, and be assured of, in the
future whenever heavy rains and floods hit the
country again is rural families being
financially secure even in the face of these
calamities.

As these come with predictable regularity, it is
important for the rural banks to continue to
tailor their operations accordingly. This means,
for example, to go easy on loans for
newly-planted crops that will suffer from the
onset of torrential rains. Since the ability to
make accurate predictions is not perfect, or an
off-season weather disturbance suddenly appears,
some of the loan portfolios go sour.

When these threaten to adversely affect the
banks, the Rural Bankers Association of the
Philippines (RBAP) immediately applies for
regulatory relief from the BSP. Such “relief” is
temporary measures to help the banks survive the
crisis while they and their clients are
recovering.

Any increase in loan demand after a calamity
depends on the extent of the resulting
devastation. If it is so sweeping as to
completely destroy entire livelihoods as Typhoon
Pablo did in four of Davao Oriental’s
municipalities, there is no loan increase to
speak of. If, however, it is the cyclical
disturbance, there may be increased demand as
rebuilding begins.

For rural banks, however, it is important that
some source of income is still available so that
these borrowers can start paying their loans
immediately, even if only for a fraction of the
regular installment amount. Rural bank clients
tend to have thinner financial cushions, which
make it difficult to even pay such a fractional
amount. This explains why rural banks in
weather-challenged areas must plan very, very
carefully at all times.

One of the ways to provide protection to poor
individuals who have little savings is through
the use of customized financial tool catering to
low valued assets and compensation for illness,
injury or death, which is made possible through
microinsurance.

Fortunately, financial institutions like rural
banks offer microinsurance products that cater
specifically to the needs of the poor.
Microinsurance is a very important tool to aid
low-income households through insurance plans
tailor-fit to their needs as it has limited
amount of premiums, contributions, fees, and
charges that do not exceed five percent of the
current daily minimum wage and a ceiling on
guaranteed benefits that do not exceed 500 times
the current daily minimum wage.
Admittedly, utilization of insurance among
Filipinos in general is still very low, what
more among those in rural communities wherein
they feel that they would rather spend money for
food and other basic things than on insurance.

And thus, there’s the rub: people have yet to
see insurance as a necessity, not until the time
comes when they actually need it. That’s the
thing about insurance. You hate, and dread, the
moment that you will actually need it. That fear
is multiplied a hundred fold when that time
indeed does come—and you don’t have insurance.

Located generally in the same community as their
target market, rural banks are in the best
position to understand the specific needs of the
rural communities compared to bigger financial
entities. As such, they have been permitted to
act as agents of microinsurance products through
the Bangko Sentral ng Pilipinas (BSP) Circular
683, series of 2010. This authority allowed
rural banks to serve as channel partners on
microinsurance, facilitate client’s enrollment
and collect premiums and claims administration.

On the other hand, the Rural Bankers Research
and Development Foundation, Inc. (RBRDFI), the
training arm of the Rural Bankers Association of
the Philippines, assists rural banks in the
enhancement of their microinsurance services by
providing a step by-step guides and ready-to-use
templates of documents required by the BSP and
the Insurance Commission.

RBRDFI conducts basic training courses on
microinsurance to qualify rural banks as
microinsurance agents and brokers. They also
promote insurance literacy among rural bank
clients through training and educational tools
and materials.
To date, RBRDFI has trained more than 200 rural
banks and 450 bank officers and staff in basic
microinsurance.

While lost lives (hopefully it does not come to
that) cannot be replaced when the full force of
Mother Nature takes its toll on us, lost
properties can be, to a degree. More
importantly, microinsurance provides that
financial safety net and peace and mind, so much
so that all poor families have to worry about
when the next typhoon hits is their personal
safety.
Nevermind their belongings. Microinsurance has
that covered, and then some.

Dear RBAP Members:
Below is Bangko Sentral ng Pilipinas (BSP)
Circular No. 808 Series of 2013: Guidelines on
Information Technology Risk Management for All
Banks and Other BSP Supervised Insitutions
The Circular Letter is posted on their official
website and can be accessed through:
http://www.bsp.gov.ph/downloads/regulations/attachments/2013/c808.pdf

MANILA – The Bangko Sentral ng Pilipinas
(BSP) has approved the implementing rules and
regulations (IRR) of the Rural Bank Act, which
allows foreign ownership of lenders in the
countryside.

BSP Deputy Governor Nestor A. Espenilla Jr. said
the Monetary Board last Thursday approved the
IRR. The law, which enables foreigners to own up
to 60 percent of a rural bank, is aimed at
recapitalizing these lenders.

"Under the RB Act, we had 90 days to finish the
IRR. We completed that," Espenilla told
InterAksyon.com. President Benigno Aquino III
signed into law the Rural Bank Act of 1992 last
May 29.

The BSP is set to release within the week the
IRR, which would detail the criteria for foreign
takeover, including congruence of strategic
objective of the investors with the law, good
reputation and financial capacity, Espenilla
said.

Last year, the BSP shut down 24 banks, mostly
rural lenders, after they were found to have had
insufficient capital to support operations. The
BSP and the Philippine Deposit Insurance Corp
earlier put in place a scheme – the
Strengthening Program for Rural Banks – whereby
third parties can acquire troubled rural banks
in exchange for tax and other incentives, such
as exemption from restrictions on additional
branches in overbanked areas.

Espenilla said the BSP expects multiple mergers
involving small banks to happen towards the end
of the year.

The Philippines has 600 rural banks, accounting
for about two percent of the country's total
banking resources of over P7 trillion.

This letter is to correct the
misconceptions that the Aug. 13 editorial “Rural
banking woes” may have created among Inquirer
readers.

The rural banking industry today may be leaner
but healthier. The reach of its 2,500 branches
across the country is wider and they provide
financial services to a broader area.

Increasing competition from bigger banks, and
even from other lending institutions that have
encroached on the market of the rural banking
industry, has affected the profitability of some
rural banks. Also, because they are the most
numerous among all bank types, rural banks will
have the highest number of closures.

On the Strengthening Program for Rural Banks and
SPRB Plus Program of the Bangko Sentral ng
Pilipinas (BSP) and the Philippine Deposit
Insurance Corp., the industry supports it. The
industry recognizes the fact that mergers and
consolidations will be crucial to the industry.
There already have been mergers and buy-outs of
rural banks by savings and commercial banks.
More prospective buyers are now doing due
diligence on many rural banks.

The increase in the non-performing loan (NPL)
ratio of the industry from 2010 to 2012 was the
result of typhoons and calamities: El Niño and
29 typhoons in 2010-2011, and Typhoon “Pablo” in
2012, which destroyed P34.4 billion worth of
private infrastructure and agricultural
property.

The 42-percent growth in total loan portfolio
(TLP)—from P4.5 billion in 2011 to P110.70
billion in 2012—also contributed to the NPL
increase. This means that with more money being
lent, there would be a slight projected increase
in the NPL.

There is also a social aspect distinct to rural
banks when it comes to NPLs because we deal with
people who live in our communities—our very own
kababayan. Foreclosures on loan collaterals are
generally avoided in favor of loan restructuring
to aid the farmer or the small businessman.
Aggressively foreclosing a property, though this
will reduce the NPL, will force people to turn
to loan sharks, resulting in more poverty for
the community.

We recognize the challenges facing the industry
and continue operating in line with the best
banking practices and in conformity with the
highest international Basel regulatory standards
as imposed by the BSP, and improving our
services as mandated by law. These include the
services to the Agri-Agra sectors; the
maintenance of the successful mobile phone
banking platform; the introduction of
microfinance and microinsurance products; and
the continued evolution of the industry through
technology and training.

Rest assured, based on the TLP, capitalization
and other performance indicators, the rural
banking industry is in a far better position
today than it has ever been in the past.

They say that a person’s true character is
tested by the way he performs in the face of
adversity. When the pressure is at its highest,
that is when one’s determination is truly
measured.

The rural banking sector is facing a challenging
time. In the midst of this, the sector still
believes that the rough patch it is currently
treading is just a temporary obstacle, a phase
that any other business goes through. Be that as
it may, this is high time for rural banks to
show they are worthy of the trust of their
clients—the under banked individuals who have
otherwise no one to turn to.

Taking things into perspective, there are many
reasons to remain optimistic. Foremost of which
is the conducive regulatory environment that is
expected to spur more activity within the
sector. The measures undertaken by the Bangko
Sentral ng Pilipinas (BSP) and the Philippine
Deposit Insurance Corp. (PDIC) have brighten the
future of local rural banks, even if current
circumstances have made the present somewhat of
a concern.

The Strengthening Program for Rural Banks (SPRB)
Plus, a joint undertaking of the BSP and the
PDIC, for instance, is seen to improve the
delivery of financial services in the
countryside as it encourage mergers and
consolidations (M&As) among rural banks,
fostering a stronger rural banking system. Under
this program, strategic third party investor
(STPI) rural banks intending to acquire eligible
rural banks through M&As can avail of financial
assistance from the PDIC and regulatory relief
from the BSP.

Eligible STPIs now include strong and
well-managed thrift banks and commercial banks.
As such, they are entitled to regulatory
incentives and/or financial assistance when
investing in eligible banks, especially those
serving the countryside and under banked
customers. Non-bank corporations may also
qualify as white knights. On top of the
financial assistance granted through PDIC,
additional incentives may be offered by the BSP
to broaden participation under the Program and
promote successful banking partnerships.

To further attract investors, the BSP likewise
gives additional premium for STPIs acquiring
three or more eligible banks. STPI commercial
and thrift banks shall be granted one additional
branching license in restricted areas, while
STPI rural banks shall be granted one additional
branching license in areas outside Metro Manila
for every three eligible banks resolved under
the Program.

The Program is expected to not only sustain and
strengthen the financial condition of resulting
banks, but also to improve their quality of
corporate governance and management.

In addition, the effects of Republic Act 10574,
or “An Act Allowing the Infusion of Foreign
Equity in the Capital of Rural Banks, Amending
RA 7353, Otherwise Known as the Rural Bank Act
of 1992 as amended and For Other Purposes,” will
be soon felt as foreign investors are expected
to troop in and infuse much-needed capital to
some rural banks.

R.A. 10575 allows non-Filipino investors to own,
acquire or purchase up to 60 percent of voting
stocks in rural banks, provided that the
percentage of foreign-owned stocks will be
determined by the citizenship of the individual
or corporate stockholders of the bank.

Not only will the new law provide banks with the
proverbial rope to hang on to, but also it will
further boost countryside development in the
country through investment in rural banks. It
will serve as a key instrument for the
government to achieve its goal of full financial
inclusion.

Things may seem daunting at this point, but the
current available opportunities and future of
the sector has never been brighter. Rural banks
are essential to countryside development and
they will remain so for many years to come.

Last Aug. 1, the Bangko Sentral ng
Pilipinas ordered the closure of another rural
bank—the Rural Bank of San Jose del Monte in
Bulacan—due to insolvency. Meaning, the bank’s
assets had fallen short of its obligations to
depositors. The bank was placed under the
receivership of the state-run Philippine Deposit
Insurance Corp. (PDIC), which is now processing
3,855 deposit accounts—or 98 percent of the
bank’s total accounts—with balances of P500,000
or less and, therefore, are fully covered by
deposit insurance. The total insured deposits
amount to P334.1 million, or 91 percent of the
bank’s total deposits. That is a lot of
government money going down the drain.

The Rural Bank of San Jose is the 12th placed
under PDIC’s receivership so far this year. In
2012, 23 rural banks were padlocked by the
Bangko Sentral and PDIC spent nearly P4 billion
on insurance claims against those financial
institutions. Going further back, 25 rural banks
were closed in 2011; 21 in 2010; and 31 in 2009,
six more than the 25 failed banks in 2008. In
all these closures, PDIC had to pay billions of
pesos in insurance claims.

Let’s look at the problem from another angle:
The non-performing loans (NPL) ratio of the
rural banking sector rose to 10.65 percent in
2012 from 10.32 percent the previous year. In
absolute amounts, this was equivalent to P12.22
billion worth of bad loans. In comparison, the
much bigger universal and commercial banks
improved their NPL ratio last year to a
record-low of 1.87 percent.

There are more than 500 rural banks catering
mainly to the needs of those in the provinces,
who have no access to the bigger banks. Only a
small portion of this banking segment appears to
be the weakest link in the local financial
sector, the Bangko Sentral says, noting that
problematic rural banks are the exception rather
than the rule. Nevertheless, the
government—through PDIC—has had to spend
billions of pesos when it had to assume the
remaining assets of failed banks and shoulder
the payment of all their liabilities.

Making things worse is that the closure of many
rural banks was due mostly to capitalization and
mismanagement problems, the Bangko Sentral said,
though some were triggered by unsafe and unsound
banking practices.

Because of the spate of closures in the rural
banking sector, the Bangko Sentral and PDIC in
2010 moved to give incentives to healthy rural
banks that will acquire their troubled peers.
The scheme, called Strengthening Program for
Rural Banks (SPRB), was expanded in September
last year to include in the list of those
eligible for incentives commercial and thrift
banks. The new and expanded version, called the
“SPRB Plus,” is in effect until December 2013.

But the families owning the rural banks seem not
really sold to the move to include the
commercial and thrift banks to the SPRB Plus
program. And yet the program was formulated
precisely due to a lack of takers from the rural
banking industry.

Most of the strong rural banks were not
interested in acquiring a weaker industry
player, regulators had found out. This, even
though the incentives being offered to potential
“white knights” include loans to help cover
capital shortfalls and improve operations,
temporary regulatory relief on capitalization
and branching requirements, condonation,
restructuring and waiver of past-due
rediscounting, and emergency loans. Other owners
simply did not want new investors to come in.
Rural bank owners should listen to Bangko
Sentral Governor Amando Tetangco. In his speech
at the 60th annual convention of the Rural
Bankers Association of the Philippines last
June, he said: “Inclusive growth is possible
only if countryside development is given the
support it needs. Embedded and part of the
communities where they operate, rural banks are
in the best position to help spur rural
development. Rural banks have a crucial role to
play in national development as 40 percent of
Filipinos live outside urban areas. I say this
because our efforts to promote mergers and
consolidation have yet to produce the results we
look forward to. While we continue to receive
applications for incentives under the [SPRB
Plus], the reality is [that] less than 20
percent of available funding for capital buildup
has been utilized.”

Tetangco is looking in the right direction: For
rural banks to achieve their full potential,
there must be a shift in the mindset of their
owners toward mergers and consolidation. There
is no other way.

In a statement Monday, the BSP said
rediscounted loans by commercial, thrift and
rural banks from the start of the year up to
July reached P15.91 billion, down 37.1 percent
from P25.29 billion in the same seven-month
period last year.

The BSP’s rediscounting facility allows banks to
sell their receivables to the BSP. Unloading
their receivables to the BSP gives banks the
cash to continue lending to businesses and
households.

The BSP charges an annual interest rate of 3.5
percent for loans extended under the
rediscounting facility, or the same as the
central bank’s overnight borrowing rate.

The BSP said 82.3 percent of the rediscounted
loans were commercial credits, 2.8 percent were
for agricultural and industrial loans, while the
remaining 14.9 percent were for companies’
capital expenditure needs, services, permanent
working capital and housing loans.

At the end of June, domestic liquidity in the
country grew 20.3 percent, the fastest expansion
in six years, latest documents from the BSP
showed. In the same period, loans expanded by
12.3 percent.